Better Stablecoin Buy: Ripple USD vs. PayPal USD

Key Points

• Ripple USD runs on the same blockchain as the XRP cryptocurrency.

• PayPal USD is backed by a vast network of retailers, banks, and PayPal users.

• Both stablecoins are reliable, but one is a safer investment.

• 10 stocks we like better than PayPal USD ›

Most cryptocurrencies are volatile investments that aren't suitable for conservative investors. However, stablecoins -- which are pegged to fiat currencies and other real-world assets -- might be compelling cryptos for investors who can't stomach a lot of near-term volatility.

The market's most popular stablecoins are pegged to the U.S. dollar. I recently compared the two biggest ones -- Tether and USD Coin -- and concluded the latter was a more reliable investment than the former.

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So today, I'll dig deeper into two other popular dollar-backed stablecoins -- Ripple USD (CRYPTO: RLUSD) and PayPal USD (CRYPTO: PYUSD) -- and see which one is a more reliable investment in this wobbly market.

Image source: Getty Images.

What are the differences between Ripple USD and PayPal USD?

Ripple USD was first issued on Dec. 17, 2024, by the fintech company Ripple Labs, whose founders created the XRP cryptocurrency. It was issued natively on the XRP Ledger as well as an ERC-20 token on Ethereum's blockchain.

PayPal USD, which was launched on Aug. 7, 2023, was issued by the Paxos Trust Company on behalf of the digital payments leader PayPal. It was initially minted as an ERC-20 token on Ethereum, and it was also launched on Solana's blockchain last May. It's integrated into PayPal's namesake app and its Venmo peer-to-peer payments platform to reach more potential users, but it doesn't run on its own native blockchain like Ripple USD.

Ripple USD's market cap of $730 billion is still smaller than PayPal USD's market cap of $1.26 billion. That's because PayPal can promote its stablecoin across its own apps -- which served 438 million active accounts in its latest quarter -- as well as its huge network of retail and banking partners.

Ripple -- which promotes its blockchain as a cheaper, faster, and more secure alternative to traditional transfers through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) -- hasn't locked in as many active users or partners yet.

PayPal USD has a bigger market cap, more expansive ecosystem, and stronger liquidity than Ripple USD. But both stablecoins are firmly backed by cash and short-term U.S. Treasuries.

Paxos publishes monthly attestations of its reserves from independent auditors, which ensures that PayPal's USD stablecoins remain firmly pegged to the U.S. dollar. Ripple, which was closely scrutinized by the Securities and Exchange Commission (SEC) over the past few years, also started to publish its monthly attestations last December.

Why would investors buy these stablecoins?

USD-backed stablecoins might seem like counterintuitive investments, since they're always valued at $1. That means they won't ever outpace inflation or beat the S&P 500.

But unlike real U.S. dollars, USD stablecoins can be held without a bank account, used for faster and cheaper cross-border money transfers, and can help people preserve their savings in countries that are grappling with hyperinflation and currency devaluation issues. They can also be used a "bridge currency" to support trades between two volatile or illiquid assets.

More importantly, both stablecoins can be lent out on centralized finance (CeFi) exchanges like Coinbase, decentralized finance (DeFi) pools like Stargate, and other stablecoin staking platforms to earn higher yields than savings accounts, CDs, and Treasuries.

The better stablecoin buy: PayPal USD

Ripple USD and PayPal USD have both stayed firmly pegged to the U.S. dollar since their debuts, and they should both be reliable stablecoins for most conservative investors. But if I had to pick one over the other, I'd stick with PayPal USD because it has a longer history, and it's backed by a broader network of banks, retailers, and PayPal/Venmo users.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ethereum, PayPal, Solana, and XRP. The Motley Fool recommends Coinbase Global and recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.