PayPal has announced plans to offer U.S. users a 3.7% annual yield on its stablecoin, PayPal USD (PYUSD), starting this summer. The rewards, paid in PYUSD, will accrue daily and be distributed on a monthly basis. Users can store their PYUSD in PayPal or Venmo wallets, where it can be utilized for purchases, transfers, or converted into fiat currency.
Launched in August 2023 through Paxos Trust Company, PYUSD is backed one-to-one by U.S. dollar deposits, short-term Treasuries, and other regulated assets. Initially deployed on Ethereum and later expanded to Solana, PYUSD has seen its market capitalization decrease from a high of $1 billion in early 2024 to around $873 million today. While this figure remains modest compared to Tether’s USDT, which boasts a market cap of over $145 billion, PayPal aims to bolster the token’s everyday utility with the new yield offering.
PayPal’s blockchain lead, Jose Fernandez da Ponte, emphasized that the yield program is designed to encourage frequent use of PYUSD, rather than allowing it to sit idle in digital wallets or be restricted to crypto-specific transactions. “We are halfway through a 10-year journey,” Fernandez da Ponte said, referencing PayPal’s long-term strategy for integrating stablecoins into its payment systems. CEO Alex Chriss highlighted the company’s focus on enhancing payment speed and affordability through stablecoin adoption, noting, “We are thinking a lot about how we can change the expense profile of the payments landscape by using stablecoins.”
Unlike other stablecoins tied to Treasury yields, PayPal’s reward program will not be solely reliant on interest generated by the assets backing PYUSD. This grants PayPal additional flexibility in its approach, with Fernandez da Ponte further noting that the yield offered will not be directly tied to Federal Reserve interest rates.
However, the introduction of yield on PYUSD could raise potential regulatory concerns. Tzahi Kanza, CEO of crypto investment firm Syndika, pointed out that while stablecoins without yield are typically not classified as securities, offering yield could alter that designation. “Stablecoins that don’t offer yield are generally not considered securities. However, yield-bearing stablecoins may fall under that classification,” Kanza explained. He also warned that the biggest risk lies in maintaining PYUSD’s peg to the U.S. dollar.
In addition to the new yield offering, PayPal continues to broaden its crypto-related services. The company recently integrated support for Chainlink (LINK) and Solana (SOL) in April, and PYUSD is already being used for cross-border settlements via Xoom. The firm is also working to deepen PYUSD’s integration into its global payment network.
As PayPal strengthens its foothold in the digital currency space, it faces competition from other financial tech companies like Robinhood, Revolut, Stripe, and Fidelity, who are also exploring or developing their own stablecoin offerings. Meanwhile, companies like Coinbase are already offering yields on stablecoins like USDC, and Circle has launched a new network for stablecoin-based international payments.
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