Anchorage Digital Introduces Stablecoin Rewards on PayPal's PYUSD

These are rewards introduced by Anchorage Digital for holders of PayPal USD (PYUSD), with rewards derived from assets held in on-chain custody or self-custody.

Anchorage Digital has announced a new rewards program for holders of PayPal (NASDAQ:PYPL) USD (PYUSD) stablecoin.

Institutions can now earn rewards on their PYUSD balances held with Anchorage, whether in their secure custody or in their institutional self-custody wallet, Porto.

The rewards are paid by Anchorage Digital Neo to those who hold PYUSD in custody platforms or wallets offered by Anchorage Digital Bank National Association, Anchorage Digital Singapore, or Anchorage Innovations.

According to the official press release, the program is not regulated by any government authority or regulatory body.

Moreover, they state that there are no guarantees regarding the stability, security, or reliability of the program.

“Participation in the Program involves intrinsic risks, including but not limited to the risk of loss of funds, lack of recourse in case of disputes, and potential volatility in the value of a stablecoin.”

However, these warnings are not surprising and are often omitted in other cases to avoid alarming potential customers.

In this particular case, since it involves institutional clients, they are required to highlight them, which adds an extra layer of transparency that is frequently lacking in similar offers.

PayPal launched its stablecoin on Ethereum in September last year. Recently, it was also launched on Solana.

It is a fully dollar-collateralized and pegged stablecoin.

When it was launched less than a year ago, it had a market cap of less than $50 million, which increased to $150 million in November 2023, following the beginning of the latest bull run.

At the start of 2024, it had risen to a market cap of $300 million, but between March and April, it even fell to $200.

However, starting from the end of April, it began a growth that seems to be still continuing.

This latest growth first brought it to around $400 million in June, and then recently to even surpass $1 billion.

As of today, it is the sixth stablecoin with the largest market cap in the world, although two of those that still surpass it are not directly dollar-collateralized.

Therefore, considering only those that are effectively and entirely dollar-collateralized, it is already the fourth in the world.

Furthermore, the third, First Digital USD (FDUSD), has been declining since April in terms of market cap.

Also because it risks not being compliant with the new European MiCA regulations. PYUSD, on the other hand, is compliant.

And it is perhaps for this reason that from the moment MiCA came into effect, it has been growing so much.

Regulatory compliance is not only one of the strengths of PayPal’s stablecoin, but also of Anchorage Digital.

It is worth noting that the CEO of Anchorage, Nathan McCauley, has stated that the rewards paid by the program will be funded with the returns generated by the underlying of PYUSD.

That is, the actual US dollars (USD) collected and immobilized. Although it is not yet clear how it will work, McCauley has stated that no rehypothecation, staking, or loans are planned.

If, for example, it were only a matter of sharing with users the proceeds from the purchase of American Treasury bonds, the annual rewards would be at most a few percentage points.

This too, after all, is symptomatic of a much more conservative and institutional approach by the company towards this type of offer.

It should be emphasized that Anchorage in 2021 obtained from the US Office of the Comptroller of the Currency the first, and so far only, federal authorization to become a digital asset bank.

Additionally, McCauley revealed that the program will be offered only to accredited investors.

The latter enjoy a Reg D exemption that also allows them to invest in unregistered securities.

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