PayPal to Introduce 3.7% Reward on PYUSD Digital Coin As per Latest News Report
The United States is set to see the rollout of a new stablecoin offering this summer, with PayPal leading the charge. But what does this mean for the future of stablecoins and their potential for generating interest or yield?
The GENIUS Act, signed into law on July 18, 2025, establishes a federal regulatory framework for stablecoins, focusing on transparency, reserve backing, anti-money laundering, redemption rights, and systemic risk mitigation. However, it does not include a ban on interest or yield for stablecoin issuers or holders.
The Act defines "payment stablecoins" as fiat-collateralized digital assets used for payments, excluding algorithmic and yield-bearing stablecoins for now. The Treasury Secretary is tasked with studying these excluded types within a year. The Act's regulatory framework is tailored to ensure safety, trust, and market integrity, rather than restricting financial returns.
It's important to note that the GENIUS Act supersedes prior bills, such as the STABLE Act, which previously proposed banning interest or yield on stablecoin holdings. Currently, there are no legislative updates indicating the passage or inclusion of the STABLE Act in the GENIUS Act framework.
Regarding PayPal's new stablecoin offering, the PYUSD stablecoin is issued by Paxos, not Coinbase. PayPal plans to offer a 3.7% return for holding PYUSD in PayPal or Venmo wallets. However, this offering is not exempt from potential interest restrictions, and the ban on interest or yield for stablecoins may apply to parties beyond the issuer.
In some jurisdictions, stablecoins are considered e-money, which is not allowed to earn interest. It's unclear how this will impact PayPal's offering, but it's a factor to keep an eye on.
Regulatory clarity for stablecoins is probably not far off. It will likely still be possible to register an asset as a security with the SEC, that might look like a stablecoin but will be allowed to pay interest. Legislators 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, the current US stablecoin legislation (GENIUS Act) does not ban interest or yield on stablecoins but regulates fiat-backed payment stablecoins issued by designated entities under a strong federal framework. Future studies are planned for non-payment or yield-bearing stablecoins. The desire to get stablecoin legislation passed soon is evident, and it will be interesting to see how this evolves in the coming months.
The GENIUS Act, superseding previous proposals like the STABLE Act, has established a federal regulatory framework for stablecoins, focusing on safe, trustworthy, and market-integrity-driven components, without imposing a ban on interest or yield for stablecoin issuers or holders.
PayPal, through Paxos, is set to launch a new stablecoin, PYUSD, offering a return of 3.7% for holding it in PayPal or Venmo wallets, despite potential interest restrictions applicable to parties beyond the issuer.
Regulators are considering the regulation of non-payment or yield-bearing stablecoins, such as algorithmic stablecoins, within the next year.
In jurisdictions where stablecoins are categorized as e-money, earning interest is not permitted, but it remains uncertain how this will impact PayPal's offering.
In summary, the GENIUS Act regulates fiat-backed payment stablecoins without imposing an interest or yield ban, with regulatory clarity for stablecoins expected to develop further in the coming months.
