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In a significant move for digital finance, PayPal has announced that users of its PayPal and Venmo platforms will soon have the opportunity to earn yield on their stablecoin holdings. This initiative, revealed on Wednesday, is set to go live this summer.
Beginning this summer, customers can expect an annual interest rate of 3.7% on their holdings of the PayPal USD stablecoin (PYUSD). This interest will be paid in PYUSD and can be utilized for various transactions within the platform, including peer-to-peer transfers, international remittances, currency exchanges, and retail purchases from PayPal’s merchant partners.
Launched in 2023, PYUSD became the first stablecoin to be backed by the U.S. dollar from a major financial institution. Despite its pioneering role, PYUSD accounts for less than 1% of the stablecoin market, which is predominantly led by Tether’s USDT, holding 66% of the market cap, and Circle’s USDC, which claims 28%, according to data from CryptoQuant. Over the last year, the entire stablecoin market cap has seen a remarkable increase of 37%.
Unlike more volatile cryptocurrencies like Bitcoin and Ether, stablecoins are specifically designed to maintain a steady value relative to non-crypto assets, primarily the U.S. dollar. Historically, they have served essential roles in trading and as collateral in decentralized finance (DeFi) applications, reflecting vital market activities and liquidity. Recently, they have also gained traction as tools for providing financial services to underbanked populations, with yield-bearing stablecoins increasingly capturing attention.
PayPal has emphasized that its approach to stablecoins aligns with its core focus on payment solutions, aiming to facilitate value transfers and purchases rather than generating revenue from interest through reserve management as seen with competitors like Tether and Circle, the latter of which recently filed for public listing.
To encourage users to adopt PYUSD, PayPal is incentivizing them to buy the stablecoin, which is a strategic move to integrate users more deeply within its ecosystem.
Alex Chriss, PayPal’s president and CEO, stated, “Stablecoins possess the potential to transform the future of commerce, serving as the building blocks for next-generation payment systems. Combining this groundbreaking technology with our extensive global network empowers us to support users’ success in the global economy.” He reiterated the company’s commitment to fostering “an innovative, commerce-ready ecosystem” that will facilitate cross-border transfers, vendor payments, and future payment applications such as payouts and bill payments.
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