PayPal joins forces with Anchorage Digital for PYUSD rewards

PayPal is partnering with Anchorage Digital to introduce its stablecoin PYUSD, despite legal issues and regulatory uncertainties surrounding stablecoin interest payments.

First reported by Fortune, the partnership will provide institutional investors with incentives to hold PayPal’s PYUSD (PYUSD) by offering rewards.

The only crypto firm in the U.S. with a federal bank charter, Anchorage Digital operates as a federally regulated digital asset bank, setting it apart from other crypto companies that operate under state licenses or as unregulated entities.

PayPal’s entry into the stablecoin market with PYUSD has struggled to gain significant momentum. A year after its launch, PYUSD’s market cap was under $1 billion, a stark contrast to industry leader Tether (USDT), which is currently valued at $117 billion.

PayPal expanded its stablecoin to the Solana (SOL) blockchain in May to improve transaction speed, reduce costs, and increase usage beyond the Ethereum (ETH) network.

Legal issues

The partnership has raised concerns about the regulatory environment surrounding stablecoin interest payments. Anchorage Digital claims that the rewards offered are not a securities offering and therefore avoid scrutiny from U.S. banking regulators.

According to Fortune, the payments will be managed by an entity in the Cayman Islands, avoiding judicial oversight.

This strategy mirrors broader industry tactics for navigating regulatory uncertainty. While stablecoins like Tether and USDC (USDC) benefit from higher interest rates from U.S. Treasury bonds, companies have often shied away from sharing those profits with users due to unclear regulations.

PayPal and Anchorage’s approach could be seen as a stopgap solution in an environment where traditional protections such as FDIC insurance do not apply.

As PayPal continues to diversify its offerings, this latest move with PYUSD highlights its commitment to expanding its presence in the crypto space despite the uncertain regulatory environment.