PayPal Intends to Provide a 3.7% Reward for Holding PYUSD Stablecoin, According to Sources
In the rapidly evolving world of digital assets, the stablecoin landscape in the United States is governed by the GENIUS Act, a federal regulatory framework signed into law on July 18, 2025.
Firstly, it's essential to clarify that Coinbase is not the issuer of USDC, a popular stablecoin. The interest earned by USDC holders on Coinbase comes from Circle, the issuer of USDC, who reportedly earns more interest on its assets than Coinbase.
The GENIUS Act, however, prohibits issuers and connected parties from paying interest or yield to stablecoin holders solely for holding the payment stablecoins. This rule is designed to maintain transparency, ensure reserve backing, and regulate issuance, rather than encouraging interest payments.
Interestingly, PayPal plans to offer a return of 3.7% for holding its PYUSD stablecoin in PayPal or Venmo wallets. However, it's important to note that Paxos, not PayPal, issues the PYUSD stablecoin. The interest on the reserves will be paid by Paxos to PayPal.
The GENIUS Act defines payment stablecoins as digital assets used for payment and redeemable at a fixed value relative to a national currency, excluding them from classifying as securities or commodities. Issuance of payment stablecoins is restricted to certain federally or state-approved entities.
While the GENIUS Act is currently the primary legislation regulating stablecoins, the STABLE Act has not been enacted. The goal is to encourage adoption of stablecoins on the PayPal network, but regulatory clarity for stablecoins may not be far off.
It's worth mentioning that in some jurisdictions, stablecoins are considered e-money, which is not allowed to earn interest. As legislation continues to evolve, it may need to apply the ban on interest more broadly, potentially not just to the issuer but also to any party that receives payment from the issuer in connection with the stablecoin.
In summary, while platforms like Coinbase and PayPal offer rewards for holding stablecoins, it's crucial to understand that these rewards are not a standard feature of stablecoins under the GENIUS Act. Regulatory clarity is likely on the horizon, and as the landscape continues to develop, we can expect more opportunities and challenges in the world of digital assets.
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