What happened?
Coinbase and PayPal are continuing with their stablecoin yield programs despite a new U.S. law, the GENIUS Act, that bans stablecoin issuers from offering interest to users to prevent them from being seen as investment vehicles. Both companies argue that the law does not apply to them because they are not the issuers of the stablecoins. This move has allowed Coinbase to offer a 4.1% APY on USDC and PayPal to provide a 3.7% annual return on its PYUSD, with both framing these benefits as “rewards” rather than yields.
Who does this affect?
This ongoing situation affects users of Coinbase and PayPal who hold stablecoins like USDC and PYUSD, as they can still reap rewards on their holdings despite the regulatory environment. It also impacts the broader crypto market stakeholders, including lawmakers who are concerned about how such activities might bypass intended regulations. Additionally, it is relevant to other companies looking at launching or offering stablecoin products, as they navigate the legal landscape shaped by the GENIUS Act.
Why does this matter?
The decision by Coinbase and PayPal to continue offering stablecoin rewards despite regulations highlights the tension between innovation in the crypto space and regulatory efforts to control market practices. It signifies a potential shift in how companies might operate within legal gray areas, affecting market confidence and investor decisions. This could lead to increased scrutiny and possibly more legislative actions, which would impact market dynamics and the way stablecoins are perceived and used globally, especially as interest from major corporations in stablecoins grows.