PayPal announced it will offer users a notable 3.7% annual yield on balances held in its PayPal USD (PYUSD) stablecoin, according to recent reports. This significant step, set to launch this summer, aims to boost the usage of PayPal’s stablecoin by making it more attractive to users.

Under this new program, rewards will accumulate daily and users will receive monthly payouts directly in PYUSD. Users can easily convert their PYUSD holdings into traditional fiat currency, use it for transactions, or transfer it to others.

Despite reaching a $1 billion market cap last year, PYUSD currently stands around $873.3 million, significantly trailing behind industry leader Tether (USDT), whose market cap exceeds $145 billion. Experts believe PayPal’s move could help narrow this gap by making its stablecoin more appealing.

However, this strategy isn't without controversy. Tzahi Kanza, CEO of Web3 firm Syndika, raised concerns about regulatory implications. Offering yield could potentially categorize PYUSD as a security, bringing additional scrutiny. Still, Kanza emphasized that PayPal's reputation should reassure users about financial risks, with the primary concern being maintaining PYUSD's dollar peg rather than the offered yield itself.

PayPal continues to aggressively position itself within the crypto space, recently adding support for cryptocurrencies like Chainlink and Solana. Industry insiders highlight that PayPal’s ongoing initiatives significantly boost the growth of stablecoins.

Initially launched in August 2023 by Paxos Trust Company, PYUSD is fully backed by cash deposits and short-term U.S. Treasury notes, regulated by New York authorities. Initially based on Ethereum, it now also operates on Solana, signaling PayPal's ambitious plans in blockchain technology.