PayPal to offer 3.7% yield on stablecoin balances: Report
Payments behemoth PayPal plans to offer a 3.7% yield on balances held in its PayPal USD stablecoin.
to an April 23 Bloomberg report, a PayPal representative said that the measure aims to encourage more usage of the firm’s stablecoin. The new program is purportedly expected to launch this summer, and the rewards will also be paid out in PayPal USD ().
Users will be able to exchange PYUSD for fiat currency, spend it, or send it to other users. The rewards will accrue daily and will be paid on a monthly basis. Jose Fernandez da Ponte explained that the company hopes this feature will lead to a higher predominance of stablecoin and crypto payments on its platform.
The report follows PayPal USD . As of publication, the stablecoin’s market cap is nearly a quarter lower at $873.3 million.
PayPal USD’s market cap chart. Source:
Tzahi Kanza, CEO of crypto investment firm Syndika, told Cointelegraph 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 believes that PayPal can keep its promises, and the main risk is still losing the peg to the dollar and not 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.”
Related:
PayPal is betting on crypto
PayPal is betting on blockchain technology with its continued product development. Reports from earlier in April show that to include Chainlink () and Solana (), giving US-based users the ability to buy, sell and transfer the popular tokens.
In fact, PayPal was cited by Polygon Labs CEO Marc Boiron as in recent years. In an interview with Cointelegraph, Boiron said, “Companies like Stripe and PayPal integrating stablecoins is likely the primary catalyst for their growth.”
Related:
The story of PayPal USD
PYUSD is a US dollar-pegged stablecoin by Paxos Trust Company on behalf of PayPal in August 2023. At the time of the launch, PayPal became the first major payment network to launch its own stablecoin, with Venmo rolling out support in September 2023.
Each token is purportedly backed one-to-one by cash deposits, short-term US Treasury notes and similar cash-equivalent assets in accounts overseen by the New York State Department of Financial Services. Initially, PYUSD was a token compliant with the ERC-20 Ethereum standard, but has since also been on Solana ().
PayPal USD’s current market cap is still a far cry from the top stablecoin, Tether’s USDt (). At the time of writing, CoinMarketCap shows that USDT’s market cap stands at $145.32 billion, over 17,255% higher than PYUSD’s. 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.]“
