PayPal offers 3.7% yield on its PYUSD stablecoin to boost adoption

PayPal is offering a 3.7% annual yield on its PYUSD stablecoin to get more people using it, after falling behind in a space already dominated by other players.

The rewards will go live this summer for PayPal and Venmo users in the U.S., Bloomberg reported on Wednesday. People who hold PYUSD in their wallets will earn the 3.7% in more PYUSD, which they’ll be able to either spend, send, convert to fiat, or use for global transfers.

This reward will be calculated daily and paid out monthly. It’s designed to make PYUSD something more than a token used only for crypto trades. The idea is to turn it into actual money people move around the world through PayPal’s network.

The company’s blockchain chief, Jose Fernandez da Ponte, said, “The rewards are here to push PYUSD as a form of payment.” Jose also said the company isn’t even halfway done with its plan: “We are halfway in a 10-year journey.”

PayPal launched PYUSD in 2023 through Paxos and became the first big financial company to issue its own stablecoin. But it hasn’t caught up to others. 

The token’s market value is around $873 million, which is far from Tether’s $145 billion USDT. At the moment, only six stablecoins have crossed the $1 billion threshold, based on numbers from CoinGecko.

PayPal pushes PYUSD into its payment system

Jose admitted that PYUSD has mainly been used for crypto-related transactions so far. That’s not what the company wants long-term. PayPal plans to plug the token into more of its own tools this year. The goal is to make money movement cheaper and faster for both merchants and customers using PayPal.

The company’s new CEO, Alex Chriss, explained that the company is trying to fix how expensive and slow the current payment systems are. “We are thinking a lot about how we can change the expense profile of the payments landscape by using stablecoins,” Alex said. That’s what this reward model is really about—getting people to move and spend PYUSD on PayPal, not just let it sit.

Unlike other stablecoins that pay interest from US Treasury returns, PYUSD’s 3.7% won’t depend on the Federal Reserve’s interest rates. Jose also said the rewards won’t come solely from the interest the company earns on the reserves backing PYUSD. That gives PayPal more control over how it funds the program, even if it means dipping into its own wallet.

Since PYUSD came out, the stablecoin market has gotten a lot more crowded. Robinhood and Revolut, two massive fintech players, are both looking at launching their own tokens. Stripe bought out Bridge, a startup focused on stablecoin tech. Fidelity is now testing one, too. Everyone’s trying to cash in on a corner of crypto that’s seen more action as interest rates stay up.

Even Circle, the company behind USDC, launched a new network just last week to help tech companies and banks settle cross-border payments using stablecoins.

Coinbase—which runs USDC in partnership with Circle—already lets users earn rewards on their balances. That’s not new. What’s different now is how many platforms are piling in, each with a slightly different approach to get users hooked.

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