The name of the game for big corporations is to make interest on your deposits. It is likely what PayPal is aiming for with the launch of their stablecoin, PYUSD and why Tether is one of the most profitable companies in the world.

So we have all heard about it now. PayPal is debuting its shiny new stablecoin, PYUSD which is issued by Paxos Trust Company on the Ethereum blockchain. Sure, some of us in this sub has been discussing about PayPal's intention to launch its own stablecoin amid all the regulatory bullshit and how it could help with mainstream adoption despite its feature of being able to be frozen and controlled by PayPal.

However, a new article on Coindesk recently came out that suggested PayPal's real intention of offering stablecoins is that they can use customers' funds to buy US Treasury Bills (T-bills) and earn interest on these deposits without giving customers any part of the interest. At year-end 2022, they reported customer accounts funds to be at $36.5 billion. Imagine now that they can issue stablecoins and have them backed by T-bills using customer funds. Essentially, PayPal can become its own money printer (not surprising).

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PayPal 2022 annual balance sheet.

Then, I took a look at Tether's quarterly report and saw why this might be one of the most profitable businesses in the world. Tether currently holds $86.5 billion in assets as a reserve backing UDST. Note that a large proportion of it is being held in US T-Bills, approximately $55.8 billion. Currently, US T-Bills are offering an interest of 5% per annum, which means Tether is earning a staggering interest of $2.79 billion just on holding T-bills alone.

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Tether's quarterly report released on 30th June 2023.

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Once the corporations realize that this is just another iteration of fractional reserve banking, more and more will follow suit and start issuing stablecoins. Give it a thought the next time you keep balances on PayPal or any other money services. You are essentially giving them a 0% interest loan and having them earn interest on them.

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TLDR; The stablecoin industry is very profitable, which is why PayPal wants a slice of the pie. Tether is rolling in the cash for doing mostly nothing.

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