How PayPal’s Stablecoin Strategy Could Reshape DeFi Yield Generation

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How PayPal’s Stablecoin Strategy Could Reshape DeFi Yield Generation

What is PayPal’s motivation behind launching a stablecoin?

PayPal recently launched their own stablecoin PYUSD, likely motivated by massive profits from stablecoin issuers like Tether. PayPal can leverage its large user base to drive PYUSD adoption. The dollars backing PYUSD can then be invested in yield-generating assets like T-bills to capture interest income – replicating the lucrative stablecoin issuer model.

How are existing crypto firms monetizing through stablecoins?

Many crypto exchanges now generate more revenue from stablecoin interest products than trading fees. For example, Coinbase earned $240 million in interest income versus $374 million from transactions last quarter. Circle with USDC is also highly profitable. Stablecoins have superior monetization versus volatile crypto assets.

Why don’t stablecoin issuers share yields with users today?

Tether’s yield ultimately comes from user funds, yet Tether captures all upside. Over time, competition should force issuers to share yields with users to drive adoption. DeFi innovation in tokenized T-bills redistributes government yields more evenly. Permissionless dollar yields without KYC are a key value proposition.

What tokenized T-bill projects show this potential?

MakerDAO and Frax Finance are pioneers using collateralized T-bills to fund benefits for token holders. Maker’s DAI stablecoin secures T-bills to back DAI, while Frax Finance buys back its FXS token. If sustainable 8%+ stablecoin yields are achievable, significant capital could enter DeFi.

How would higher stablecoin yields impact DeFi?

The 2020 DeFi boom was fueled by money seeking yield when rates fell near zero. Higher stablecoin yields would again attract assets to DeFi. This capital could propagate to other protocols once on chain. DeFi’s next bull market likely requires stable yields exceeding risk-free rates through tokenized T-bills and real-world assets.

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