PayPal has launched a rewards program for its stablecoin, PayPal USD (PYUSD), offering users an annual yield of 3.7% on their holdings.

The program will begin this summer, expected between June and September, for PayPal and Venmo users in the US, with rewards paid daily and distributed monthly in PYUSD.

These rewards can be converted to fiat, used for purchases, or transferred internationally.

Stablecoins like PYUSD are linked to stable assets like the US dollar, making them popular for payments due to their low volatility.

Despite being launched in 2023, PYUSD has a market value of US$873 million, much smaller than Tether’s US$145 billion.

PayPal aims to integrate PYUSD into its platform to offer quicker and more affordable payments.

🔗 Source: Bloomberg

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🧠 Food for thought

1️⃣ Stablecoin rewards programs emerge as yields become strategic weapons

PayPal’s 3.7% rewards rate signals a shift in how stablecoin issuers are competing for market share beyond just existing on trading platforms.

This comes at a critical moment as the Federal Reserve’s interest rate decisions directly impact stablecoin economics, with research estimating issuers could lose $625 million in annual interest income per 50 basis-point rate cut 1.

Major stablecoin operators like Tether currently generate substantial revenue from their reserves, with Tether alone holding approximately $93.2 billion in U.S. debt securities 1.

PayPal’s approach represents a departure from relying solely on reserve interest, directly sharing returns with users to drive adoption in a market where Tether and USDC together control 86-90% of a rapidly growing $225-232 billion market 23.

By offering these rewards, PayPal addresses a key obstacle in stablecoin adoption, creating clear incentives for consumers to use stablecoins for payments rather than just trading.

2️⃣ Stablecoin usage evolving beyond crypto trading toward payments

While stablecoins facilitated over $7 trillion in transactions in 2022, they have primarily served as trading vehicles rather than payment methods 45.

PayPal’s rewards program aims to redirect stablecoin usage toward everyday payments, aligning with consumer interest. Deloitte research shows 83% of consumers are interested in using digital currencies for payments 6.

Monthly stablecoin transfer volume has more than doubled from $1.9 trillion to $4.1 trillion between February 2024 and February 2025, with active wallets increasing 53% to over 30 million in the same period 7.

This growth trajectory has attracted major financial institutions, with Standard Chartered predicting the stablecoin market could reach $2 trillion by 2028, particularly if the Genius Act creates regulatory clarity in the United States 8.

PayPal’s CEO Alex Chriss explicitly frames their stablecoin strategy around “changing the expense profile of the payments landscape,” indicating the company sees significant opportunities in reducing payment costs.

3️⃣ Traditional finance companies race to build stablecoin infrastructure

PayPal’s rewards program enters an increasingly competitive landscape where financial institutions are positioning themselves in the stablecoin market.

In addition to PayPal, companies including Robinhood, Revolut, Stripe (which acquired stablecoin startup Bridge), and Fidelity are all developing stablecoin offerings to improve payment efficiency 9.

This corporate interest reflects recognition of stablecoins’ potential to address longstanding payment challenges, particularly for cross-border transactions and in regions with unstable currencies 103.

Federal Reserve Governor Christopher Waller acknowledged in February 2025 that stablecoins have potential to improve retail and cross-border payments, while emphasizing the need for regulatory frameworks to address risks 9.

The push toward stablecoin adoption is also driven by broader institutional adoption, with Visa working to integrate stablecoins into its payment infrastructure to enhance transaction efficiency and reduce costs 11.

Recent PayPal developments

Timeline
04-Mar-2025 💰 PayPal-backed Mintoak acquires fintech firm Mintoak acquires Digiledge, a bill payment firm Digiledge to enhance Mintoak’s digital currency offerings
05-Feb-2025 📉 PayPal stock drops 10% due to slow growth, competition PayPal shares fell nearly 10% amid growth concerns Unbranded payments growth declined to just 2%
30-Oct-2024 📉 PayPal stock falls 7% after weak Q4 forecasts PayPal shares drop 7% after Q4 forecast Q3 earnings beat expectations but revenue missed
27-Sep-2024 💳 PayPal launches payment service to support China merchants PayPal launches payment service in Shenzhen. Supports cross-border merchants with various payment options.
21-Feb-2023 🚀 PayPal Ventures backs $20m round of Indian SaaS platform for SMEs Mintoak raises $20M in Series A funding Funds to enhance tech and expand into new markets
01-Feb-2023 💼 PayPal to shed 2,000 jobs globally PayPal to cut 2,000 jobs, 7% of workforce Employees offered generous packages and support