Coinbase and PayPal Offer 4 and 3.7 APY on Stablecoins Amid Regulatory Gray Area

Coinbase and PayPal continue to offer high-yield incentives on stablecoins despite the passage of the GENIUS Act, which prohibits stablecoin issuers from offering interest to holders. Both companies are providing rewards on USDC and PYUSD, offering around 4% and 3.7% annual percentage yields (APY), respectively, by structuring these rewards as platform revenue-sharing incentives rather than traditional interest payments [1].

This approach hinges on the distinction between issuer and platform roles. Coinbase, once involved in the co-development of USDC with Circle, no longer functions as an issuer and now relies on Circle, the sole issuer of USDC, to manage the asset. Similarly, PayPal partners with Paxos for PYUSD issuance, allowing it to distance itself from direct issuer liability. This structural separation enables both firms to argue that they are not subject to the restrictions outlined in the GENIUS Act [1].

The regulatory environment appears to be favoring such strategies. In April 2025, the Trump administration dropped a 15-month investigation by the Securities and Exchange Commission (SEC) into PayPal’s PYUSD, signaling a shift in enforcement priorities and regulatory tolerance [1]. Coinbase CEO Brian Armstrong and PayPal’s James Alexander Chriss have both highlighted the competitive advantage these rewards offer in terms of user acquisition and retention. Armstrong described the initiative as a “differentiated product” while Chriss emphasized its role in driving new user growth [1].

Analysts remain divided on the long-term viability of these strategies. While the revenue-sharing model may currently avoid regulatory scrutiny, the distinction between “rewards” and “interest” could become a point of contention as financial regulations evolve. A Senate staffer noted that the GENIUS Act was specifically designed to target issuers and not secondary market activities, leaving room for legal interpretations that may challenge the legitimacy of such programs [1].

For now, Coinbase and PayPal’s approach underscores the growing sophistication of stablecoin strategies in navigating regulatory boundaries. If successful, it could set a precedent for other firms seeking to offer competitive yields while staying compliant. However, the broader financial system and regulators will need to continue monitoring the implications of such models, particularly in relation to stablecoin flows and their impact on traditional financial markets [1].

Source:

[1] CoinMarketCap Community - [https://coinmarketcap.com/community/articles/6891e0a38bbf3c38ef3e5918/](https://coinmarketcap.com/community/articles/6891e0a38bbf3c38ef3e5918/)