PayPal Launches Loyalty Program with 3.7% Yield on Stablecoin Balances
KEY FACTS: PayPal is launching a program this summer offering U.S. users a 3.7% annual interest rate on PYUSD stablecoin balances, to boost adoption of its dollar-backed cryptocurrency launched in 2023. With a market cap of about $1 billion, PYUSD trails giants like Tether and USDC, but PayPal’s initiative, accessible to its 400 million users without minimum balance or lock-up requirements, seeks to compete by blending stablecoin stability with savings-like yields. Backed by Paxos Trust Company and compliant with U.S. regulations, the program could drive PYUSD use in payments and remittances,
Source: President and CEO PayPal - Alex Chriss/ X
PayPal Launches Loyalty Program with 3.7% Yield on Stablecoin Balances
PayPal Holdings Inc. has announced a new initiative offering U.S. users a 3.7% annual interest rate on their PYUSD balances, set to roll out this summer. The program, revealed on April 23, 2025, aims to make PYUSD a more attractive option for consumers and businesses alike, positioning PayPal as a formidable player in the rapidly growing stablecoin market. This development comes as stablecoins (cryptocurrencies pegged to stable assets like the U.S. dollar) continue to gain traction for their utility in payments, remittances, and decentralized finance (DeFi).
Now, we’re making PayPal and Venmo the most rewarding way to hold PYUSD. With our new loyalty program, users on PayPal and Venmo will be able to earn rewards when they hold PYUSD within their accounts. This will not just increase adoption but also use of digital currencies for everyday commerce – from sending money internationally to making purchases and more.
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PayPal’s PYUSD, launched in August 2023, is a dollar-backed stablecoin designed to facilitate seamless transactions within the PayPal ecosystem and beyond. Unlike volatile cryptocurrencies such as Bitcoin, PYUSD maintains a stable value, making it an appealing choice for everyday financial activities. However, despite its potential, PYUSD has faced challenges in gaining widespread adoption, with competitors like Tether (USDT) and USD Coin (USDC) dominating the stablecoin market. As of April 2025, Tether holds a market capitalization of over $80 billion, while USDC boasts more than $30 billion, dwarfing PYUSD’s roughly $1 billion in circulation.
To close this gap, PayPal is leveraging its vast user base of over 400 million accounts and introducing financial incentives to encourage PYUSD usage. The 3.7% interest program, which will be available to U.S. customers holding PYUSD in their PayPal wallets, is a direct response to the competitive landscape. PayPal aims to attract both retail users and institutional players seeking low-risk returns in the crypto space by offering a yield comparable to some high-yield savings accounts or money market funds.
Starting this summer, U.S. PayPal users who hold PYUSD in their digital wallets will automatically earn a 3.7% annualized yield, compounded monthly. The interest will be paid out in PYUSD, further encouraging users to keep their funds within the PayPal ecosystem. Unlike traditional banking products, the program requires no minimum balance or lock-up period, offering flexibility for users to deposit or withdraw their PYUSD at any time.
The initiative is supported by PayPal’s partnership with Paxos Trust Company, the issuer of PYUSD, which ensures the stablecoin is fully backed by U.S. dollar reserves, Treasury securities, and other cash equivalents. This backing provides a layer of security for users, addressing concerns about the stability and reliability of digital assets. Additionally, PayPal has emphasized that the interest program complies with U.S. regulatory frameworks, including oversight from the New York State Department of Financial Services, under which Paxos operates.
The stablecoin market has become increasingly competitive, with issuers vying to capture market share through innovative offerings. Tether, the market leader, has maintained its dominance through widespread acceptance across crypto exchanges and DeFi platforms. Meanwhile, USDC, issued by Circle, has gained traction for its transparency and regulatory compliance. PayPal’s entry into the space with PYUSD was a significant step, but its relatively small market share has prompted the company to explore new strategies.
The 3.7% interest program is a direct challenge to competitors, as few stablecoin issuers currently offer yield-bearing products to retail users. For comparison, some DeFi protocols provide yields on stablecoin deposits, but these often come with higher risks and technical barriers that deter mainstream adoption. PayPal’s program, by contrast, is designed to be user-friendly, accessible through its existing platform, and integrated into its broader suite of financial services, including payments, remittances, and cryptocurrency trading.
Posts on X reflect growing excitement about the announcement, with users comparing the 3.7% yield to traditional savings accounts and other crypto-based earning opportunities. Some have dubbed the move a “stablecoin arms race,” suggesting that PayPal’s initiative could pressure competitors to introduce similar programs. One X user remarked, capturing the sentiment of cautious optimism surrounding the program.
“PayPal is basically paying you to hold their crypto. Smart move to get people hooked...”
Paypal's attempt is to blend the stability of a dollar-backed stablecoin with the earning potential of a savings product. This will bridge the gap between crypto and mainstream finance, appealing to users who may be hesitant to engage with volatile cryptocurrencies.
The program also highlights the potential for stablecoins to disrupt traditional banking. With interest rates on PYUSD outpacing many standard savings accounts, some of which offer yields below 1%, PayPal could attract depositors looking for better returns without sacrificing liquidity.
Moreover, the initiative could accelerate stablecoin adoption in everyday transactions. PayPal has already integrated PYUSD into its payment infrastructure, allowing users to send, receive, and spend the stablecoin at millions of merchants worldwide. PayPal's incentivization of users to hold PYUSD, may drive greater usage of the stablecoin for cross-border payments, peer-to-peer transfers, and online purchases, further solidifying its role in the digital economy.
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