PayPal is set to begin offering a 3.7% annual yield on balances held in its native stablecoin, PayPal USD (PYUSD), in an effort to boost adoption and usage.
According to a report from Bloomberg on April 23, the initiative is aimed at incentivizing more users to hold and transact with PYUSD. The rewards program is slated to launch this summer, with users receiving payouts in the same stablecoin.
PYUSD holders will have the flexibility to convert their holdings into traditional fiat, make purchases, or transfer funds to others. Interest will accumulate daily, with monthly disbursements. PayPal’s goal is to strengthen the role of stablecoins and digital currencies within its ecosystem.
The move comes on the heels of PYUSD hitting a $1 billion market capitalization during the summer of 2024. However, the market cap has since dipped to around $873 million.
Tzahi Kanza, CEO of crypto investment group Syndika, told Cointelegraph that PayPal must navigate regulatory concerns to avoid its stablecoin being treated as a security due to the yield feature. He noted that while PayPal is likely to meet its obligations, the main risk for users is potential depegging from the U.S. dollar rather than issues related to yield.
“Stablecoins that don’t pay interest generally avoid being considered securities, but offering returns might change that status,” Kanza explained.
PayPal’s Crypto Push Continues
This latest development underscores PayPal’s commitment to expanding its blockchain footprint. Earlier in April, the company broadened its crypto services by adding support for Chainlink (LINK) and Solana (SOL), enabling U.S. users to buy, sell, and transfer these digital assets.
Polygon Labs CEO Marc Boiron recently credited PayPal, alongside Stripe, for playing a significant role in the mainstream growth of stablecoins. He remarked that companies integrating stablecoin technology are driving much of the sector’s expansion.
Background on PYUSD
Launched in August 2023, PYUSD is a U.S. dollar-pegged stablecoin issued by Paxos Trust on behalf of PayPal. It marked the first time a major payment processor introduced its own stablecoin. Support through PayPal’s Venmo platform followed shortly after, in September.
Each PYUSD token is backed by cash reserves, short-term U.S. Treasury securities, and other liquid assets, all held under the supervision of the New York State Department of Financial Services. Initially built on Ethereum’s ERC-20 protocol, PYUSD has since expanded to run on the Solana blockchain as well.
Despite its progress, PYUSD still trails behind leading stablecoins like Tether (USDT), which boasts a market cap exceeding $145 billion. Kanza highlighted that while Tether’s dominance lies in market share, it lacks the same focus on regulation, transparency, or user returns — areas where PayPal might gain a competitive edge.
“To stand out, focusing on compliance, openness, and attractive yields could give PayPal an advantage,” he said.
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