Stablecoin issuers could be looking at lower income as the Federal Reserve (Fed) kicked off its first rate cut cycle since 2020.

Each 50 basis point cut by the Fed could lead to a $625 million drop in total annual interest income for stablecoin issuers, according to a new report from digital asset data provider CCData.

Those hits could quickly add up as the Fed itself expects cuts totaling 50 basis points by the end of this year, and another 100 basis points by the end of next year.

Why Would A Rate Cut Affect Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged to another cryptocurrency. Some of the most popular stablecoins have their value pegged to the U.S. dollar and keep a reserve in cash or equivalent investments—often U.S. Treasurys—to maintain that peg.

Centralized stablecoin providers, such as Tether (USDTUSD) and Circle (USDCUSD), have relied heavily on their holdings of U.S. Treasurys earning interest over the past few years as high interest rates drove up Treasury yields.

U.S. Treasurys make up the vast majority of reserves held by stablecoin issuers, at just over 80%. This amounts to holdings of nearly $125 billion worth of Treasurys.

Tether, the largest stablecoin by market cap, alone holds $93.2 billion worth of U.S. debt, which accounted for much of that digital asset company’s $5.2 billion of profits in the first half of 2024, the CCData report said.

Bitcoin.com Director of Engineering Andrei Terentiev speculated on social media that lower interest rates could eventually push stablecoin providers and other financial institutions into riskier assets in an effort to earn a return on their reserves.

“With lower yields on safer assets, institutions often shift their focus toward ‘risk-on’ assets,” Terentiev posted on the platform X. “Think stocks, crypto, and other investments that offer higher potential returns but come with greater risk,” he wrote.

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LUNC: Terra Classic’s Role in the Global Payments Ecosystem

Terra Classic, known as LUNC, is a blockchain protocol utilizing stablecoins for price-stable global payments. Combining stability and adoption of fiat with Bitcoin’s resilience, Terra aims for efficient transactions. Its mainnet launched in 2019, and expanded with stablecoins linked to several currencies. In 2022, Terra Classic emerged after a rebranding, with its native token LUNA renamed LUNA Classic. While the new Terra chain focuses elsewhere, LUNC draws parallels to historic blockchain splits. With its unique approach to stablecoins, LUNC offers potential for those seeking an innovative payments system. The design seeks to balance stability and speed, reflecting lessons learned from past crypto market challenges.

Stellar (XLM): A Bridge for Global Fund Transfers

Stellar (XLM) offers a platform for fast, affordable fund transfers by connecting diverse financial systems. It uses blockchain technology to support currencies from around the world, including cryptocurrencies like Bitcoin. Stellar Lumens, its own currency, helps facilitate these transactions. The network aims to improve existing financial setups, not replace them. Both individuals and businesses can benefit, using Stellar for global money transfers or building blockchain apps. The Stellar Development Foundation encourages using the network for things like NFTs and smart contracts. Over the years, Stellar has built meaningful partnerships and processed a massive number of transactions, creating a promising stage for its future growth.

Kaspa: The Future of Fast and Secure Transactions

Kaspa is a proof-of-work cryptocurrency using the GHOSTDAG protocol. Unlike typical blockchains, GHOSTDAG lets blocks coexist rather than reject them. It organizes them while keeping them all. Kaspa uses a blockDAG structure for high-speed and secure transactions. It can currently process one block per second, with goals of increasing that significantly. This allows nearly instant confirmations. Kaspa includes features like Reachability, SPV proofs, and plans for subnetwork support. These enhance its scalability and could simplify layer 2 developments. This innovative approach positions Kaspa as a promising player in the crypto landscape. With this setup, Kaspa offers quick and secure transactions, making it an exciting option for users.

VeChain’s Blockchain Powers Real-World Solutions in Enterprise

VeChain is a blockchain platform that is transforming how industries track goods. Known for its supply chain solutions, it lets companies monitor products like food, fashion, and cars. With its native token, VET, ranking high in market cap, it’s clear that VeChain has significant use and acceptance. By assigning IDs and sensors to products, it helps verify authenticity and manage recalls, proving vital for luxury and automotive industries. Founded by Sunny Lu, it moved from Ethereum to its own blockchain, VeChainThor. This switch introduced a dual-token system and a proof of authority for better transaction validation. Major partnerships demonstrate its practical applications, making VeChain a key player in blockchain solutions.

Dogecoin’s Rise: From Meme to Major Cryptocurrency Player

Dogecoin started as a light-hearted alternative in the crypto world. Its Shiba Inu logo became a popular symbol online. Unlike Bitcoin, Dogecoin has no supply limit, which means coins are always being produced. It gained attention when its value soared, influenced by Elon Musk and social media buzz. Dogecoin’s playful origins didn’t stop it from becoming one of the top cryptocurrencies by market cap. Its journey shows how community support and online trends can shape financial markets. With many fans worldwide, Dogecoin remains an interesting part of the digital currency landscape.

Conclusion

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Global payments giant PayPal will allow U.S. business account holders to buy, sell, and hold cryptocurrencies directly from their accounts.

Global payments giant PayPal has unveiled new features allowing U.S. business account holders to buy, sell, and hold cryptocurrencies directly from their accounts.

The move comes as more business clients seek access to crypto services available to consumers. PayPal also intends to expand its cryptocurrency features into regular business operations. According to the statement, this feature will be unavailable in New York State.

PayPal’s peer-to-peer payments app Venmo initially allowed clients to manage cryptocurrency in 2020. Since then, they have “continuously made significant steps to increase cryptocurrency utilization,” the statement read.

“Business owners have increasingly expressed a desire for the same cryptocurrency capabilities available to consumers. We’re excited to meet that demand by delivering this new offering, empowering them to engage with digital currencies effortlessly,” said Jose Fernandez da Ponte, senior VP of blockchain, cryptocurrency, and digital currency at PayPal.

According to PayPal’s statement, the new features of crypto services for business accounts aim to boost crypto’s real-world utility. The company’s latest move is a response to business owners who have been asking for access to crypto services since the platform launched its consumer-level digital currency services.

“Since we launched the ability for PayPal and Venmo consumers to buy, sell, and hold cryptocurrency in their wallets, we have learned a lot about how they want to use their cryptocurrency,” Fernandez da Ponte added.

PayPal stock has climbed roughly 26% this year, suggesting positive sentiment from investors.

Businesses can Now Transfer Cryptocurrency On-Chain to External Wallets

In addition to the new buying and selling ability, U.S. merchants can now transfer cryptocurrencies to third-party wallets. This new functionality extends the flexibility of digital currency transactions for businesses.

“PayPal business account holders can now send and receive supported cryptocurrency tokens to and from external blockchain addresses,” the company mentioned in its statement.

Last month, Crypto.com teamed up with PayPal to allow US users to make purchases through cryptocurrencies. This alliance expands on earlier joint ventures between the two businesses, which included allowing PayPal to recharge Crypto.com Visa Card. Besides Crypto.com, PayPal’s stablecoin is available within selected exchanges including Coinbase, Bitstamp, and Kraken.

PayPal Cuts Fees by Expanding PYUSD to Solana

In 2023, PayPal launched its own US dollar-denominated stablecoin (PYUSD), in August 2023. PYUSD was issued by a US-regulated entity named Paxos Trust Company. Initially, PYUSD was launched as an ERC-20 token through the Ethereum blockchain.

One limitation of Ethereum-based stablecoins is their high transaction fees. PayPal expanded PYUSD to the Solana network in May 2024 to minimize the cost. This move led to a significant fee reduction (sometimes over 90%). These lower transaction rates on Solana made PYUSD more attractive for regular purchases like coffee or groceries, which boosted the demand for PayPal to introduce crypto services to businesses.

“The Solana network’s speed and scalability make it the ideal blockchain for new payment solutions that are accessible, cost-effective, and instantaneous,” said Sheraz Shere, General Manager of Payments at the Solana Foundation. “Continued adoption from industry participants like PayPal helps realize the next generation of fintech innovation.”

According to BraveNewCoin data, PYUSD’s market capitalization has expanded dramatically since its introduction over a year ago, rising from approximately $45 million in September 2023 to around $700 million at the time of writing.