Coinbase and PayPal continue offering yield-like incentives on stablecoin holdings despite the GENIUS Act—federal legislation enacted to prohibit stablecoin issuers from paying interest. The law specifically targets issuers like Circle (USDC) and Paxos (PYUSD), creating a regulatory loophole that platforms exploit by framing payouts as "rewards" rather than interest.
Coinbase provides 4.1% APY on USDC holdings, while PayPal offers 3.7% APY on PYUSD through its app and Venmo. Both companies emphasize they are not issuers but intermediaries, allowing them to bypass direct restrictions. This semantic distinction positions payouts as platform-level benefits derived from revenue-sharing or engagement incentives rather than issuer-guaranteed yields.
Regulators and lawmakers express concerns that this workaround undermines the GENIUS Act's intent to separate payment-focused stablecoins from speculative products. Critics argue it creates an uneven playing field and invites "semantic engineering," though platforms defend the model as monetizing user engagement. The sustainability of these rewards hinges on future regulatory amendments targeting platform-level offerings.