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PayPal is planning to offer a 3.7% annual yield on the PayPal USD (PYUSD) stablecoin holdings to its customers in the U.S., Bloomberg reported on Apr. 23.
Expected to launch this summer, the annual yield on the PYUSD holdings will be accrued daily and paid monthly. PayPal will pay the yield in PYUSD, which users can exchange for fiat currency, transfer domestically or globally, or pay via PayPal Checkout.
The fintech company's move is aimed at encouraging stablecoin usage as a payment mode among its wide user base.
A stablecoin is a type of cryptocurrency that is created to maintain a stable value, unlike traditionally volatile cryptocurrencies such as Bitcoin. It is usually pegged to a traditional currency like the US dollar or a commodity like gold.
Issued by Paxos Trust Company, PYUSD is PayPal’s stablecoin that is pegged to the USD and is backed by U.S. Treasuries, among other reserves.
Jose Fernandez da Ponte, the company’s senior vice president and general manager of blockchain, crypto and digital currencies, said, “We see stablecoins as building the next generation of payment rails but we are aware that is something that takes time.”
Following PayPal’s example, leading TradFi players such as Fidelity, Robinhood Markets, and Revolut are also exploring the stablecoin market.
World Liberty Financial Inc. (WLFI), the crypto venture backed by President Donald Trump, has also launched its stablecoin, USD1.
The total stablecoin market cap stood at $239 billion at the time of writing, with Tether’s USDT and Circle’s USDC collectively worth more than $200 billion.
PayPal is the largest traditional finance (TradFi) firm to launch a stablecoin. Launched in 2023, PYUSD is among the top 10 cryptocurrencies with a market cap of $873 million.