PayPal’s PYUSD triples to $3.8B after LayerZero multichain rollout; 3.7% yield raises regulatory questions
PayPal’s PYUSD stablecoin surged from about $1.2 billion in September to roughly $3.8 billion in market cap by Q4, driven by a ~113% supply increase and a 150% jump in transactions (1.8 million) in November. The rapid growth accelerated after PayPal integrated LayerZero in September, expanding PYUSD onto nine additional blockchains (including Aptos, Avalanche, Tron, Flow upgrades and others) and giving direct access to PayPal and Venmo’s 400+ million active users. PYUSD was the second-fastest growing stablecoin in Q3 2025 behind Ethena’s USDe. The broader stablecoin market sits near $307.2 billion, with USDT (~$184.6B) and USDC (~$77.3B) holding over 85% market share. Market attention has turned to PYUSD’s advertised 3.7% annual yield on balances, which appears to conflict with the GENIUS Act that bans yield-bearing stablecoins and requires 1:1 reserves and limited issuer types. PayPal has not publicly detailed how it will align PYUSD’s yield with federal rules; the company currently operates under NYDFS oversight. The news underscores PayPal’s distribution advantage in onboarding users to crypto payments, may affect PYUSD adoption and regulatory scrutiny, and comes amid a modest overall crypto market rebound (BTC ~ $92.9K, ETH ~ $3,052 at publication).
Neutral
The news is market-relevant but produces a mixed signal: rapid adoption and multichain expansion via LayerZero is bullish for PYUSD adoption and PayPal’s crypto payment utility, as shown by a threefold market-cap rise and surging transactions — factors that can increase on-chain liquidity and use-case-driven demand. However, the advertised 3.7% yield introduces regulatory risk because the GENIUS Act restricts yield-bearing stablecoins and tightens issuer/reserve requirements. That regulatory uncertainty tempers bullish momentum; possible enforcement, product changes, or yield removal could trigger outflows or reduced demand. Short-term impact: likely positive for PYUSD trading volumes and related payment/bridge activity as market participants rotate into the expanding token, while speculative interest may increase. But volatility may rise on any regulatory announcement or PayPal guidance—traders should watch on-chain flows, redemption behavior, and official communications. Long-term impact: if PayPal resolves compliance (e.g., by restructuring yield mechanisms, partnering with compliant banks, or adjusting reserves), PYUSD could sustain growth and strengthen fiat–DeFi rails; if not, regulatory action or forced changes could shrink adoption and price stability. Comparable cases: USDC faced regulatory scrutiny in the past that led to reserve and operational changes, temporarily increasing volatility but ultimately preserving market share once compliance steps were taken. Overall, expect neutral-to-cautiously bullish fundamentals offset by material regulatory downside risk—monitor legal developments, PayPal disclosures, and on-chain supply/flow metrics.