TLDR
- PayPal will offer 3.7% annual yield on its PYUSD stablecoin to US users starting this summer
- Rewards will accrue daily, be paid monthly in PYUSD, and be available to both PayPal and Venmo users
- PYUSD launched in 2023 with Paxos, is backed 1:1 by US dollar deposits, and deployed on Ethereum and Solana
- The stablecoin’s market cap has fallen from $1 billion to $873 million, still far smaller than Tether’s $145 billion
- PayPal views stablecoins as “the next generation of payment rails” in a “10-year journey” of financial innovation
PayPal is set to begin offering a 3.7% annual yield on its proprietary stablecoin PayPal USD (PYUSD) this summer, according to a recent Bloomberg report. This new rewards program aims to boost adoption and expand usage of the payment giant’s digital currency offering.
The program will allow both PayPal and Venmo users to earn rewards on PYUSD holdings in their crypto wallets. These rewards will accrue daily and be paid out on a monthly basis in PYUSD tokens, which customers can then convert to fiat currency, use for payments, or transfer to other users.
Jose Fernandez da Ponte, PayPal’s senior vice president and general manager of blockchain, crypto and digital currencies, explained the company’s long-term 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. We are halfway [through] a 10-year journey.”
PYUSD Background and Market Position
PYUSD launched in August 2023 in collaboration with stablecoin issuer Paxos Trust Company. The token is backed one-to-one by US dollar deposits, short-term Treasuries, and similar assets held in regulated accounts, making it fully redeemable at a 1:1 ratio with the US dollar.
Initially deployed on the Ethereum blockchain, PYUSD later expanded to the Solana network as well. Despite early momentum following its launch, the stablecoin’s market capitalization has declined from a peak of $1 billion in 2024 to approximately $873 million currently.
This places PYUSD well behind market leader Tether (USDT), which boasts a market cap exceeding $145 billion. The yield program appears to be part of PayPal’s strategy to grow its stablecoin’s footprint in the competitive digital currency space.
Strategic Goals and Implementation
PayPal executives have made it clear that the yield program is intended to promote everyday use of PYUSD rather than having it sit idle in wallets or be limited to crypto-specific transactions. The company is working to integrate stablecoins more deeply into its global payment systems.
CEO Alex Chriss highlighted the potential for stablecoins to transform payment economics. “We are thinking a lot about how we can change the expense profile of the payments landscape by using stablecoins,” Chriss stated.
The rewards won’t be solely funded by interest generated from the reserves backing PYUSD. This gives PayPal more flexibility than other stablecoins that are tied directly to Treasury yields. Fernandez da Ponte noted that the return offered through the program is not dependent on Federal Reserve rates.
PayPal has also been expanding PYUSD’s utility. The stablecoin has been used for cross-border settlements through Xoom, PayPal’s international money transfer service. This is part of a broader effort to incorporate the digital currency into the company’s global payment infrastructure.
The introduction of yield-bearing features raises potential regulatory questions. Tzahi Kanza, CEO of crypto investment firm Syndika, explained: “Stablecoins that don’t offer yield are generally not considered securities. However, yield-bearing stablecoins may fall under that classification.”
Kanza added that the most important risk factor remains maintaining the token’s peg to the dollar. This 1:1 backing is critical for user confidence and stability.
PayPal continues to expand its crypto-related services beyond just PYUSD. In April, the company added support for Chainlink (LINK) and Solana (SOL) to its cryptocurrency offerings, showing a commitment to the broader digital asset ecosystem.
The move comes as other financial technology companies including Robinhood, Revolut, Stripe, and Fidelity are exploring or developing their own stablecoin products. Coinbase already offers yield on USD Coin (USDC), while Circle recently launched a new network to support stablecoin-based international payments.
With this new yield program, PayPal is positioning PYUSD as both a medium of exchange and a store of value within its ecosystem. The 3.7% yield rate makes it competitive with many traditional savings products, potentially attracting users beyond the typical crypto audience.
The program’s summer launch date has not been specified yet, but it represents an important step in PayPal’s strategy to make cryptocurrency more accessible and useful to mainstream consumers.
