Financial technology firm PayPal (PYPL) is offering consumers an annual interest rate of 3.7% on their stablecoin holdings with the company.
Moving forward, customers will earn the 3.7% yield on the PayPal USD stablecoin (PYUSD). The interest payments can be used for transacting with other users on the platform, funding international transfers, exchanging dollars or other fiat currency, and making purchases with PayPal accredited merchants.
PayPal launched its stablecoin in 2023, making it one of the first financial institutions to launch a U.S. dollar-backed stablecoin. It now makes up less than 1% of the market, which is dominated primarily by Tether’s’ USDT (USDT) and Circle’s USDC (USDC). A stablecoin is a cryptocurrency whose value is pegged to an underlying asset, typically the U.S. dollar or price of gold.
The Unbanked
Stablecoins are watched closely for evidence of demand, liquidity, and activity in the cryptocurrency market. They also offer people who are unbanked or underbanked access to financial services. Stablecoins that earn interest have become increasingly popular among crypto enthusiasts.
PayPal stresses that its core business lies in online payments and digital finance. However, its stablecoin enables the transfer and exchange of value and purchase of goods. Others stablecoins earn interest income by holding reserves in interest-bearing assets.
Is BTC a Buy?
Most Wall Street firms don’t offer ratings or price targets on stablecoins, so we’ll look at the three-month performance of Bitcoin (BTC) instead. As one can see in the chart below, the price of BTC has declined 11.48% in the last 12 weeks.
