Coinbase and PayPal bypass federal bans to continue offering stablecoin yields

ChainCatcher news, according to Financefeeds, despite the U.S. "GENIUS Act" prohibiting stablecoin issuers from providing passive income to users through staking or deposit balances, Coinbase and PayPal still offer USDC (4.1% APY) and PYUSD (3.7% APY) returns to users in the form of "reward programs."

Coinbase CEO Brian Armstrong explained during the earnings call that the company is not the issuer of USDC (which is issued by Circle) and that what they provide is a "reward" rather than "interest," thus not violating the new regulations. PayPal similarly maintains its PYUSD stablecoin's 3.7% yield program through the third-party issuer Paxos.

Both platforms categorize the returns as platform benefits rather than issuer actions, raising regulatory concerns. Supporters claim this move is merely for fund optimization, but critics warn it could undermine the effectiveness of the ban and may face stricter regulatory scrutiny in the future.