PayPal Bets Big on PYUSD: 3.7% Yield Aims to Disrupt Stablecoin Market
PayPal has introduced a new program to promote adoption of its stablecoin, PayPal USD (PYUSD), rewarding users with a 3.7% annual yield on holdings.
The program, which is set to launch this summer for U.S. PayPal and Venmo users, is part of an effort to position PYUSD as a practical payment tool for everyday transactions.
Daily Rewards, Monthly Payouts: Inside PayPal’s PYUSD Program
Rewards, distributed in PYUSD, will be calculated daily and paid monthly, with options to convert to fiat, send to others, fund cross-border transfers through Xoom, or use PayPal Checkout to make purchases.
The program aligns with PayPal’s strategy to integrate PYUSD into its payment network, with intentions to cut transaction costs and improve efficiency.
Unlike some stablecoin reward programs tied to reserve interest, PayPal may partially fund the 3.7% yield from its own capital, a strategic investment to expand PYUSD’s reach.
Jose Fernandez da Ponte, PayPal’s senior vice president of blockchain, stated, “The rewards are here to push PYUSD as a form of payment.”
CEO Alex Chriss pointed to the potential for stablecoins to lower payment costs on PayPal’s platforms, including Venmo and Xoom.
With $866M in Play, PYUSD Faces Tether and New Rivals
PYUSD, launched in 2023 with Paxos, has a market capitalization of approximately $866 million at the moment, down from the $1 billion peak it reached in summer 2024. It’s also trailing behind the $145 billion market leader, Tether (USDT), while only six stablecoins currently have a market cap greater than $1 billion.
PayPal faces competition from Tether, USD Coin, and new players like Robinhood, Revolut, Stripe, and Fidelity, all of which are contributing stablecoins. Coinbase offers a 4.1% yield on USDC, slightly above PayPal’s rate, though PayPal’s integration with Venmo and Xoom provides a single advantage for payments and remittances.
The stablecoin market is shaped by trends like Circle’s cross-border payment network and regulatory policy developments. Meanwhile, in Europe, the Markets in Crypto-Assets (MiCA) regulation classifies stablecoins as e-money, prohibiting interest, potentially limiting PayPal’s global expansion.
In the U.S., proposed legislation such as the STABLE Act and GENIUS Act may impose similar restrictions, putting the long-term sustainability of the program in danger.
PayPal’s Decade-Long Dream: Building a Digital Currency Empire
PayPal’s 3.7% reward program marks a key step in its decade-long plan to incorporate digital currencies, as mentioned in Fernandez da Ponte’s statement.
By rewarding PYUSD holders, PayPal seeks to promote a closed-loop system that drives transaction volume across its platforms. The daily accrual and monthly payout structure balances user rewards with operational flexibility.
The program’s success depends on navigating regulatory challenges and staying ahead of the competition. Potential U.S. regulations similar to MiCA could limit the program, while Tether and USDC’s market dominance takes on PayPal’s market share.
However, the 3.7% yield makes PYUSD appealing for U.S. users, leveraging PayPal’s payment infrastructure to drive adoption. If sustained, this effort could improve PYUSD’s role in digital payments, cementing PayPal’s position in the new financial landscape.
