Stablecoin PYUSD to bring 3.7% reward with PayPal's upcoming offering, as per recent reports
In a significant move for the financial industry, the GENIUS Act has been signed into law on July 18, 2025, establishing a federal regulatory framework for U.S. payment stablecoins. The new law aims to differentiate payment stablecoins from bank deposits and prevent erosion of traditional deposits.
The key points of the legislation include:
- No Interest or Yield Payments: The GENIUS Act forbids any form of interest or yield payment to individuals holding payment stablecoins, whether in cash or tokens [1][2][3].
- Regulatory Framework: The Office of the Comptroller of the Currency (OCC) will regulate federal qualified payment stablecoin issuers, while state-qualified issuers under $10 billion outstanding can be regulated at the state level if certified [3].
- Foreign Issuer Restrictions: Foreign stablecoin issuers must comply with U.S. regulatory standards, register with the OCC, hold reserves in U.S. institutions, and meet anti-money laundering criteria to offer payment stablecoins in the U.S. [1].
- Effective Date: Though signed into law in July 2025, the GENIUS Act is expected to take effect at the earliest in the first quarter of 2027 [5].
The prohibition on paying interest or yield on stablecoins marks a significant regulatory shift, placing stablecoins primarily as transactional instruments rather than yield-generating assets [2].
In contrast, no recent updates or progress have been reported on the STABLE Act, suggesting that the GENIUS Act is the currently active and relevant legislation addressing stablecoin interest/yield payment prohibition.
Meanwhile, developments in the stablecoin market continue. For instance, Coinbase, though not the issuer of USDC, may still pay interest on it, with the offering set to roll out this summer in the United States [4]. Similarly, PayPal plans to offer a 3.7% return on its PYUSD stablecoin held in PayPal or Venmo wallets, with Paxos paying most of the interest on the reserves to PayPal [6].
However, if legislators aim to ban interest on stablecoins, they may need to extend the ban to parties receiving payment from the issuer, as well as consider the potential impact on bank deposits and loan costs [7][8].
As regulatory clarity for stablecoins is likely to be achieved soon, the financial landscape is set to undergo further changes in the coming months.
- With the GENIUS Act in place, payment stablecoins are no longer considered as yield-generating assets, but primarily as transactional instruments in the finance and technology sector.
- The federal regulatory framework for U.S. payment stablecoins, as outlined in the GENIUS Act, aims to establish a stable and regulated environment for banking and investing in stablecoins.
- The prohibition on interest or yield payments to individuals holding payment stablecoins according to the GENIUS Act has sparked debates about its potential impact on the assets and investments in the banking and finance industry.
- The breakthrough in establishing a regulatory framework for payment stablecoins, as achieved by the GENIUS Act, is expected to have far-reaching implications on the news, insights, and advancements in the banking, finance, and technology sectors.
