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TLDR
- PayPal will offer 3.7% annual yield on its PYUSD stablecoin starting summer 2025
- Rewards will accrue daily, be paid monthly in PYUSD, and available to PayPal and Venmo users
- PYUSD launched in 2023 with Paxos, backed 1:1 by US dollar deposits
- Current market cap is $873 million, down from $1 billion peak (compared to Tether’s $145 billion)
- Program aims to incentivize using stablecoins as payment rather than holding them idle
PayPal is set to begin offering customers a 3.7% annual yield on its PYUSD stablecoin. The program will launch this summer as part of the payment giant’s strategy to boost adoption and usage of its digital currency.
The new rewards program will be available to both PayPal and Venmo users in the United States. Rewards will accrue daily and be paid out monthly in PYUSD, giving customers flexibility in how they use their earnings.
Users will be able to convert their rewards to fiat currency, use them for payments, or send them to other users. This flexibility aims to integrate the stablecoin more deeply into PayPal’s payment ecosystem.
PYUSD Background and Current Status
PayPal launched PYUSD in August 2023 in collaboration with Paxos Trust Company. The stablecoin is backed one-to-one by US dollar deposits, short-term Treasuries, and similar assets held in regulated accounts.
PYUSD was initially deployed on the Ethereum blockchain. It later expanded to the Solana network as part of PayPal’s multi-chain strategy.
Despite early momentum after its launch, PYUSD’s market capitalization has declined from its peak. Current figures show a market cap of approximately $873 million, down from a high of $1 billion in 2024.
This places PYUSD far behind market leader Tether (USDT), which boasts a market cap exceeding $145 billion. The yield program appears designed to help close this gap by making PYUSD more attractive to users.
Strategic Goals and Long-Term Vision
Jose Fernandez da Ponte, PayPal’s senior vice president and general manager of blockchain, crypto and digital currencies, explained the company’s vision in an interview with Bloomberg. “We see stablecoins as building the next generation of payment rails but we are aware that is something that takes time,” he said.
Da Ponte described the current initiative as part of a broader plan.
“We are halfway through a 10-year journey,” he added, suggesting PayPal’s long-term commitment to cryptocurrency integration.
PayPal CEO Alex Chriss has emphasized the potential for stablecoins to transform payment systems. “We are thinking a lot about how we can change the expense profile of the payments landscape by using stablecoins,” Chriss stated.
The company aims to improve both the cost and speed of payments by incorporating stablecoins like PYUSD into its network. This aligns with growing industry trends toward faster, cheaper digital payments.
Regulatory and Financial Considerations
The rewards program raises questions about regulatory classification. Tzahi Kanza, CEO of crypto investment firm Syndika, noted the potential implications: ”
Stablecoins that don’t offer yield are generally not considered securities. However, yield-bearing stablecoins may fall under that classification.”
PayPal has structured the program with regulatory concerns in mind. The rewards won’t be funded solely by interest generated from PYUSD reserves, giving PayPal more flexibility than stablecoins tied directly to Treasury yields.
Da Ponte clarified that the return offered through the program is not dependent on Federal Reserve rates. This approach may help address some regulatory concerns while providing competitive yields.
The primary risk for any stablecoin remains maintaining its peg to the dollar. PayPal appears confident in the reserves backing PYUSD, which Paxos manages with 100% of reserves available for 1:1 redemption.
PayPal continues to expand its cryptocurrency offerings beyond PYUSD. In April, the company added support for Chainlink (LINK) and Solana (SOL), broadening its crypto ecosystem.
PYUSD has also been integrated into cross-border settlements through PayPal’s Xoom service. The company is working to further incorporate the stablecoin into its global payment systems.
Other financial technology companies including Robinhood, Revolut, Stripe, and Fidelity are exploring or developing their own stablecoin products. Coinbase already offers yield on USDC, while Circle recently launched a new network supporting stablecoin-based international payments.
English (US) ·