PayPal Intends to Entice Cryptocurrency Users by Offering 3.7% Interest on PYUSD Deposits
FreshTake:
PayPal is steering the stablecoin game with a 3.7% annual return on PYUSD, its dollar-backed digital coin, aiming to boost adoption amid industry competition.
In an innovative move, PayPal users can soon rake in some green on their PYUSD holdings, with a reward scheme set to drop this summer, accessible to both PayPal and Venmo users. The interest? It’ll be credited in PYUSD, convertible to cold hard cash, sent to peers, or used for international transactions.
According to Jose Fernandez da Ponte, PayPal's blockchain, crypto, and digital currencies chief, the strategy is to make PYUSD more than just a savings account, but a go-to digital payment rail.
Global Ambitions with PYUSDPayPal introduced PYUSD in 2023 in partnership with Paxos Trust Co. As of now, it ranks eighth in the stablecoin market, valued at around $873 million. Powerhouses like Tether (USDT) with $145 billion and Circle (USDC) with $61.7 billion are miles ahead, according to CoinGecko data.
With rivals like Robinhood, Revolut, Fidelity, and Stripe gunning for a piece of the action, PayPal's latest feature comes at a strategic time. Interestingly, PYUSD's yield won't be pegged to the U.S. Federal Reserve rates or solely funded through the company's interest reserves.
PayPal outmaneuvering competitorsThe high yield on PYUSD stands out in the stablecoin market, where major players like Tether (USDT) and Circle (USDC) have mainly offered yields via decentralized finance (DeFi) protocols, not directly from issuers. Unlike traditional fintechs and payment firms, PayPal's move differentiates PYUSD by offering built-in yield without requiring users to engage with external platforms.
Compared to competitors like Robinhood and Revolut, which offer yields on cash or crypto, but not on proprietary stablecoins, PayPal's yield is more like crypto-native products, but with a higher rate tied to its own stablecoin. Meanwhile, firms like Fidelity and Stripe neither offer a proprietary stablecoin nor incentives for direct yield.
Market ImpactThe yield could lure users seeking secure returns within PayPal's ecosystem, potentially growing PYUSD's market share (currently less than 1% of the $160 billion-plus stablecoin market). By offering yield through traditional finance mechanisms, PayPal sidesteps DeFi's regulatory ambiguity, positioning PYUSD as a compliant alternative.
This move may spur competitors like Revolut or payment firms like Stripe to either develop their own yield-bearing stablecoins or partner with DeFi protocols for similar offerings. However, PYUSD’s success depends on integrating the digital coin into its 426 million active accounts and incentivizing cross-border/merchant use cases.
- PayPal's blockchain and digital currencies chief, Jose Fernandez da Ponte, aims to transform PayPal's PYUSD into a go-to digital payment rail beyond just a savings account.
- As of now, PYUSD ranks eighth in the stablecoin market, valued at around $873 million, but rivals like Tether (USDT) and Circle (USDC) are miles ahead, with PYUSD's yield standing out in the market.
- Compared to competitors like Robinhood and Revolut, which offer yields on cash or crypto but not on proprietary stablecoins, PayPal's yield is more like crypto-native products but with a higher rate tied to its own stablecoin, PYUSD.
- In 2023, PayPal introduced PYUSD in partnership with Paxos Trust Co., and the strategy is to make PYUSD more than just a savings account, but a go-to digital payment rail in the finance technology industry.
- With the high yield on PYUSD, PayPal's latest feature comes at a strategic time as rivals like Robinhood, Revolut, Fidelity, and Stripe are gunning for a piece of the action in the stablecoin market.
- The success of PYUSD depends on integrating the digital coin into PayPal's 426 million active accounts and incentivizing cross-border/merchant use cases, potentially growing PYUSD's market share in the $160 billion-plus stablecoin market.
