PayPal offers 3.7% yield on PYUSD stablecoin balances

PayPal offers a 3.7% yield on the PYUSD stablecoin to boost adoption. PayPal issues rewards on a monthly basis, facilitating their conversion into fiat or spending.

PayPal is reportedly set to provide a 3.7% yield on balances held in stablecoins, the PYUSD, a move that it intends to use to drive its adoption.

The company intends to distribute monthly rewards in the stablecoin, as Bloomberg reported.

A PayPal spokesperson, as noted in a Bloomberg report on April 23, highlighted that the initiative aims to promote more frequent use of the company’s stablecoin.

Starting this summer, the program will issue rewards in PayPal USD, allowing users to convert it to fiat, spend it, or send it to others. Rewards will be earned daily and distributed monthly.

PayPal intends this feature to drive higher usage of stablecoin and crypto payments on the company’s platform.

Following PayPal USD’s $1 billion market cap in the summer of 2024, reporters released this report.

At the time of writing, the stablecoin’s market cap stands at $873.3 million, reflecting a drop of nearly a quarter.

Tzahi Kanza, CEO of Syndika, stated that “from a regulatory standpoint, PayPal must ensure that offering interest doesn’t cause its stablecoin to be classified as a security.”

“When it comes to financial risks for the users, he said that PayPal can keep its promises, and the main risk is losing the peg to the dollar rather than interest-related issues.” He said:

“Stablecoins that don’t offer yield are generally not considered securities. However, yield-bearing stablecoins may fall under that classification.”

Through continued product development, PayPal invests in the potential of blockchain technology.

As reported in April, PayPal has included Chainlink and Solana in its cryptocurrency selection, providing US users with the option to buy, sell, and transfer these popular tokens.

According to Marc Boiron of Polygon Labs, PayPal has played a pivotal role in fueling the recent rapid expansion of the stablecoin market.

Boiron commented in an interview, “Companies like Stripe and PayPal integrating stablecoins are likely the primary catalysts for their growth.”

Paxos Trust Company introduced PYUSD on PayPal’s behalf in August 2023.

With the launch, PayPal became the first major payment company to issue a stablecoin, and Venmo started supporting it in September 2023.

Reports state that every token is backed equally with cash, U.S. Treasury bills, and comparable cash-like assets managed under the oversight of the New York State Department of Financial Services.

PYUSD started as an ERC-20 token on Ethereum, but PayPal introduced it on Solana more recently.

PayPal USD’s market capitalization still falls far short of matching Tether’s USDt.

USDT currently holds a market cap of $145.3 billion, making it more than 17,255% bigger than PYUSD’s, based on CoinMarketCap data.

Kanza said that “Tether’s strength lies in its market dominance — not in its regulatory compliance, transparency, or yield” since it does not offer those. He added:

“To compete effectively, targeting these three areas — compliance, transparency and returns — would be a smart strategy [for PayPal.]“