PayPal to Offer 3.7% Annual Yield on PYUSD Stablecoin to Boost Adoption

PayPal is gearing up to launch a 3.7% annual yield on its own stablecoin, PayPal USD (PYUSD), this summer, according to a recent Bloomberg report. This new incentive program is designed to drive broader adoption and encourage everyday usage of PayPal’s digital currency.

Both PayPal and Venmo users will soon be able to earn rewards on their PYUSD balances held within their crypto wallets. Rewards will accumulate daily and be distributed monthly in the form of PYUSD tokens. From there, users can easily convert them into fiat currency, spend them for purchases, or transfer them to friends and family.

PayPal’s Vision for the Future of Payments

In an interview with Bloomberg, Jose Fernandez da Ponte, PayPal’s Senior Vice President and General Manager of Blockchain, Crypto, and Digital Currencies, shared the company’s long-term ambitions. He emphasized, “We view stablecoins as the foundation for the next generation of payment infrastructure, but we recognize this is a long-term journey we’re about halfway through a 10-year plan.”

What is PYUSD?

PayPal launched PYUSD in August 2023 in partnership with Paxos Trust Company, a regulated stablecoin issuer. Each PYUSD token is backed 1:1 by U.S. dollar deposits, short-term Treasuries, and similar highly liquid assets, ensuring full redeemability.

Initially rolled out on the Ethereum blockchain, PYUSD has since expanded to Solana as well, enhancing its transaction speed and scalability. However, despite early enthusiasm, PYUSD’s market cap has dipped from its 2024 high of $1 billion to around $873 million today, still a fraction of industry leader Tether (USDT), whose market cap exceeds $145 billion.

With the introduction of this yield program, PayPal is aiming to strengthen PYUSD’s presence in the increasingly competitive stablecoin market.

Driving Everyday Use of PYUSD

The 3.7% yield offering is part of PayPal’s broader strategy to encourage people to use PYUSD in everyday transactions, not just hold it as a speculative asset. CEO Alex Chriss explained the company’s thinking: “We’re focused on how stablecoins can reshape the cost structure of the payments industry.”

Importantly, the yield won’t solely depend on interest generated from the reserves backing PYUSD, giving PayPal more flexibility compared to traditional stablecoins that are directly tied to Treasury yields. Fernandez da Ponte also confirmed that the payout rate is not tied to Federal Reserve interest rates.

Expanding PYUSD’s Real-World Utility

Beyond yield rewards, PayPal is expanding PYUSD’s use cases. The stablecoin is already being used for international transfers through Xoom, PayPal’s cross-border money transfer service. This move is part of a larger initiative to embed PYUSD into PayPal’s global payments infrastructure.

However, introducing a yield-bearing feature could attract regulatory scrutiny. Tzahi Kanza, CEO of crypto investment firm Syndika, noted, “Stablecoins that offer yield could be classified as securities, unlike traditional stablecoins that don’t.” He emphasized that maintaining the 1:1 dollar peg remains essential for user trust and long-term stability.

PayPal’s Broader Crypto Strategy

PayPal’s interest in the digital asset space extends beyond PYUSD. In April, the company added support for popular cryptocurrencies like Chainlink (LINK) and Solana (SOL) to its platform. These moves demonstrate PayPal’s commitment to becoming a major player in the broader crypto ecosystem.

Meanwhile, other fintech giants such as Robinhood, Revolut, Stripe, and Fidelity are also exploring stablecoin innovations. Competitors like Coinbase already offer yields on USD Coin (USDC), and Circle recently introduced new infrastructure to facilitate stablecoin-based international payments.

What This Means for Users

By offering a 3.7% return, PayPal positions PYUSD not only as a payment solution but also as a competitive store of value, comparable to many traditional savings options. This strategy could attract a wider audience, including users who may not yet be heavily involved in cryptocurrency.

While the exact launch date hasn’t been announced, PayPal’s new rewards program marks a significant step toward making digital currencies more accessible and functional for everyday consumers.