Global payment giant PayPal and stablecoin issuer Paxos collaborated to launch the U.S. dollar stablecoin PayPal USD (PYUSD) in August last year, taking advantage of PayPal's global payment application scenarios and using it in remittance services, B2B payments and digital goods payments. Determined to become the intermediary between legal currency and Web3.

However, one year after its launch, PYUSD’s total market capitalization has still not exceeded one billion U.S. dollars, ranking sixth among stablecoins in global market capitalization. PayPal and cryptocurrency custodian company Anchorage Digital have announced the launch of a stablecoin rewards program that will also accrue interest on customer account PYUSD balances in the future.

Source: CoinGecko Account PYUSD balances also earn interest

According to a report by The Block, PayPal and cryptocurrency custodian company Anchorage Digital are partnering to launch a stablecoin rewards program. The program will disburse the proceeds generated in PYUSD through a cryptocurrency native bank or Anchorage’s self-custodial wallet Porto. This is a way for users to earn money on their PYUSD balances without staking, lending or re-hypothecating their funds. The company claims the stablecoin will remain fully segregated in its on-chain accounts, meaning Anchorage and PayPal will not lend customers’ assets to earn returns to pay for the program.​

Anchorage CEO Nathan McCauley said:

The program will help increase institutional adoption of stablecoins and bridge the gap between traditional finance and the digital asset ecosystem.

The program will be funded by Anchorage Digital, with proceeds coming from its underlying assets. Rewards will be paid out in PYUSD and may vary depending on deposit size.

Regulatory Issues of Stablecoin Interest Rates

In traditional finance, customers can receive more or less interest income from demand deposits or fixed deposits when they deposit their money in a bank. However, stablecoin issuers use the assets issued by stablecoins to buy short-term government bonds or reverse repurchase (RRP), making a lot of money in the era of high interest rates, but customers holding stablecoins do not receive a dime of interest. .

But once stablecoins start earning interest, will banking regulators such as the U.S. Securities and Exchange Commission (SEC) or the Office of the Comptroller of the Currency (OCC) sit back and watch? How is this behavior different from a bank account or a securities issuance?

In fact, in order to expand USDC’s market share with stablecoin issuer Circle, cryptocurrency exchange Coinbase also provides a 5.2% reward for its USDC, but it treats this plan as a marketing item on the company’s balance sheet.

And according to Anchorage CEO Nathan McCauley, the program is only available to accredited investors and therefore may qualify for a Reg D exemption, which allows companies to sell securities without registering. And the scheme itself does not originate from Anchorage Digital’s banking arm, but is run by its independent Cayman Islands-based subsidiary Anchorage Digital Neo.

This article: Can stablecoins earn interest? The post PayPal and Anchorage launch PYUSD reward program first appeared on Chain News ABMedia.