PayPal has collaborated with Anchorage Digital to offer a rewards program for customers holding PayPal’s USD stablecoin (PYUSD). The program is available to clients who use Anchorage’s services or the Porto institutional self-custody wallet to store their PYUSD holdings. This initiative allows participants to earn rewards without rehypothecation, staking, or lending involved, and the PYUSD remains fully accessible and segregated in the participants’ accounts on-chain for quick deployment. PYUSD was launched in 2023 as an ERC-20 token on the Ethereum blockchain, backed 1:1 by US dollars and issued by Paxos Trust Company, a regulated crypto custodian in the US. The stablecoin aims to compete with other prominent dollar-backed stablecoins like USD Coin from Circle Internet Financial.
PYUSD stands out due to its integration capability with various external developers, wallets, and web3 applications, enhancing its utility and appeal in the digital economy. Stablecoins like PYUSD are increasingly preferred in global financial transactions due to their programmability, ease of transfer, and the option for self-custody, making them particularly beneficial for global remittances. The growth of regulated digital asset custodians, exemplified by companies like Anchorage Digital, is becoming more prevalent in the US. Anchorage also introduced Porto, a self-custody solution for institutional clients, earlier this year. Other institutions like Coinbase are offering annual yields on USDC holdings through their institutional custody arm, demonstrating the sector’s growth and appeal to traditional financial institutions looking to enter the crypto space.
PayPal’s PYUSD stablecoin supply on the Solana blockchain has exceeded that on Ethereum, driven by its integration into decentralized exchanges like Jupiter and Orca, where it has been added to liquidity pools. This expansion has established PYUSD’s presence on Solana alongside leading stablecoins such as USDC and USDT. Solana’s token extension standard, which aligns with the SPL token standard, offers advantages for PYUSD, including reduced development and testing efforts, enterprise-ready capabilities, and enhanced flexibility. Notably, the stablecoin market, valued at over $140 billion, remains unregulated. In response, Senators Cynthia Lummis and Kirsten Gillibrand have proposed a new bill to regulate stablecoins, which would subject payment stablecoin issuers to reserve and operational requirements, including the creation of subsidiaries dedicated to issuing stablecoins.
The rewards program introduced by PayPal and Anchorage Digital for users holding PYUSD provides an opportunity for clients to earn rewards without engaging in rehypothecation, staking, or lending. PYUSD’s integration with external developers, wallets, and web3 applications enhances its utility and appeal in the digital economy, making it a competitive stablecoin in the market. The growth of regulated digital asset custodians like Anchorage Digital and the introduction of self-custody solutions for institutional clients signify the increasing adoption of cryptocurrencies by traditional financial institutions. PayPal’s PYUSD stablecoin supply on the Solana blockchain surpassing that on Ethereum highlights the expansion of PYUSD’s presence in the decentralized finance ecosystem, alongside other leading stablecoins like USDC and USDT.
Solana’s token extension standard, which conforms to the SPL token standard, offers benefits for PYUSD, including reduced development efforts, enterprise-ready capabilities, and enhanced flexibility. However, the stablecoin market, currently unregulated and valued at over $140 billion, may face regulatory scrutiny with proposed legislation aimed at regulating stablecoins. Senators Cynthia Lummis and Kirsten Gillibrand’s bill proposes reserve and operational requirements for payment stablecoin issuers, which could impact the stablecoin market and its players. As the stablecoin market evolves and gains more attention from regulators, the collaboration between PayPal and Anchorage Digital to provide a rewards program for PYUSD holders reflects the increasing integration of stablecoins into traditional financial systems and the growing importance of digital asset custody solutions for institutional clients.
