PayPal's PYUSD Savings Vault Attracts $200M in 24 Hours, Offering 4.25% APY via Spark Protocol

In a landmark move for mainstream decentralized finance (DeFi) adoption, PayPal has successfully launched its PYUSD Savings Vault on the Spark protocol. The product, which allows holders of PayPal's stablecoin to earn on-chain yield, saw an explosive start, attracting $200 million in deposits within its first 24 hours of operation.

The vault offers an attractive annual percentage yield (APY) of up to 4.25%, a rate competitive with other major stablecoin vaults for USDC, USDT, and Spark's native USDS token. This initiative is a core part of PayPal and Spark's previously stated ambition to grow PYUSD deposits on the platform to $1 billion.

Mechanics and Strategy: The PYUSD Savings Vault is part of Spark's Savings V2 product line. When users deposit PYUSD, they receive an 'spPYUSD' accumulative token. According to the protocol's documentation, 90% of deposits are allocated through the Spark Liquidity Layer into various yield-generating strategies, while 10% is held as liquidity for instant withdrawals. The current vault composition shows over 57% in stablecoins, with other allocations including on-chain crypto lending (15.73%), AAA corporate debt (10.24%), OTC crypto lending (10.10%), and U.S. Treasurys (5.32%).

Broader Context and Significance: The launch represents a strategic convergence between a traditional finance giant and decentralized protocols. PayPal integrated PYUSD into Spark's decentralized money market, SparkLend, in September 2024. As of the launch, SparkLend already had nearly $150 million PYUSD supplied (earning ~2.11%) and about $67 million borrowed. The total value locked (TVL) in Spark's Savings V2 vaults has grown to approximately $395 million since their October launch.

The yield for the PYUSD vault is "anchored" to the Sky Savings Rate, which is funded by revenue from the Sky Protocol (formerly MakerDAO). This revenue comes from stability fees on overcollateralized loans, real-world asset investments, and liquidity provisioning.

Regulatory Backdrop: The launch coincides with a significant regulatory development for the stablecoin. Paxos, PayPal's partner in issuing PYUSD, recently received a federal banking charter from the Office of the Comptroller of the Currency (OCC). Paxos has stated that this makes PYUSD "the largest dollar stablecoin issued under federal regulatory oversight," with a market capitalization of $3.8 billion.