PayPal Provides 3.7% Interest on PYUSD Stablecoin in Bid to Lure Crypto Users
As crypto-fintech competition heats up, PayPal is going big to differentiate with its stablecoin offering. The payments giant announced that it will offer U.S. customers a 3.7% annual yield on balances of its PayPal USD (PYUSD) stablecoin. The rewards program aims to enhance the adoption and utilization of PYUSD, which launched in 2023 in partnership with Paxos Trust Co.
New Crypto Rewards Program Launching This Summer
Bloomberg reports that the new PYUSD rewards program will go live this summer and will be available to both PayPal and Venmo users. The 3.7% yield will be awarded in PYUSD tokens and will accrue daily, although payment will be made on a monthly basis.
Holders will have multiple options for utilizing their PYUSD, ranging from exchanging it for U.S. dollars to transferring it to friends or merchants or even utilizing it for cross-border payments. The flexibility is designed to appeal to both crypto enthusiasts and mainstream users experimenting with digital assets for the first time.
PayPal’s Effort to Increase PYUSD Usefulness
Jose Fernandez da Ponte, senior vice president and general manager of blockchain, crypto, and digital currencies at PayPal, stated the yield program is part of a larger move to expand the utility of PYUSD. The company sees stablecoins as a central infrastructure for future digital payments, with da Ponte calling them “the next generation of payment rails.”
By offering financial incentives for users to hold and use PYUSD, PayPal hopes to drive more user activity and integrate its stablecoin more into daily transactions.
Competing with Market Leaders
While PayPal launched PYUSD nearly a year ago, its stablecoin currently ranks eighth in market capitalization, with a circulation of approximately $873 million. That figure pales in comparison to market leaders like Tether’s USDT ($145 billion) and Circle’s USDC ($61.7 billion), according to CoinGecko.
Meanwhile, fintech firms such as Robinhood and Revolut are exploring their own stablecoin projects, and traditional firms such as Fidelity and Stripe are also dipping into digital assets. PayPal’s yield program would be a key differentiator in such a competitive field.
Yield Uncoupled from Fed Rates
Curiously, the 3.7% return on PYUSD will not be tied to the interest rates of the U.S. Federal Reserve, nor will it be determined by the interest PayPal earns on its reserves alone. This suggests that PayPal may be subsidizing the returns in a bid to quickly boost adoption and establish a strong position in the stablecoin sector.
In so doing, PayPal signals its growing interest in shaping the future of digital finance through blockchain and crypto-enabled payment solutions.
