PayPal collaborates with Anchorage Digital to provide stablecoin rewards, navigating unclear regulations in the process

When PayPal entered the stablecoin competition in August 2023 with PYUSD, the industry welcomed the participation of a traditional finance company in a field dominated by crypto-native firms like Tether and Circle. However, a year later, PYUSD still lags behind its competitors with a market capitalization of less than $1 billion compared to Tether’s $117 billion.

To boost adoption, PayPal has teamed up with Anchorage Digital, the only U.S. crypto firm with a bank charter, to offer rewards to accredited investors holding PYUSD in its U.S. bank, Singapore subsidiary, or noncustodial wallet Porto.

The launch of the program raises concerns about regulatory uncertainties surrounding stablecoin interest payments as the industry lacks clear guidelines. Despite this, PYUSD and the rewards program do not fall under securities regulations or banking oversight based on Anchorage Digital’s position, marking a new venture for the industry.

The fine print

Stablecoins tied to assets like the euro or precious metals exist, but USD-backed coins like Tether and USDC have gained popularity. The profitability of stablecoin assets from U.S. Treasuries has not typically been passed on to holders due to regulatory ambiguity, leading to caution from U.S.-based companies in offering interest payments.

The status of stablecoins remains uncertain with differing opinions from regulatory bodies. Despite this, initiatives like PYUSD’s rewards program aim to drive stablecoin adoption in the face of regulatory challenges.

As PayPal expands its offerings and Anchorage Digital pioneers in the stablecoin space, the industry continues to push boundaries while navigating regulatory complexities.

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