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Coinbase is eliminating fees for purchasing PayPal’s stablecoin in an initiative designed to boost the coin’s adoption and enhance payment options for both consumers and institutional clients.
In a recent announcement, Coinbase outlined its objective of accelerating the uptake and usage of the PayPal USD (PYUSD), a stablecoin pegged to the U.S. dollar that has struggled to gain significant traction since its introduction in 2023. Currently, with a market capitalization of approximately $730 million, PYUSD holds less than 1% of the dollar-pegged stablecoin market, significantly overshadowed by Tether’s USDT and Circle’s USDC, which command 66.5% and 28.3% of that market, respectively, as reported by CryptoQuant.
Furthermore, PayPal has indicated plans to work collaboratively with Coinbase on “stablecoin-based solutions” to facilitate the movement and management of funds globally, particularly in commercial contexts. This partnership may also explore potential applications for PYUSD within decentralized finance and other blockchain platforms.
Alex Chriss, PayPal’s president and CEO, expressed enthusiasm about the collaboration, stating, “We are excited to drive new, exciting, and innovative use cases together with Coinbase and the entire cryptocurrency community, putting PYUSD at the center and driving further utility and adoption for digital currencies among developers, customers, and other users.”
Competitive Landscape for Stablecoins
The competition to dominate the stablecoin payment sector has intensified, particularly with expectations of upcoming legislation from Congress aimed at stabilizing the regulatory environment for cryptocurrencies. Traditionally, stablecoins have primarily been utilized for trading and lending within the crypto space; however, their increasing appeal to institutional investors looking for cost-effective ways to transact in dollars outside of conventional financial systems has expanded their use cases.
Recently, the issuer of USDC, Circle, announced the launch of a new payments and remittance network tailored for financial institutions, positioning itself as a direct competitor to PayPal’s core business. Additionally, Ripple, known for its XRP cryptocurrency, introduced the Ripple USD stablecoin (RLUSD) in December, further intensifying the competitive framework.
With a vast network of over 430 million consumers and merchants, PayPal presents a unique opportunity to promote stablecoin adoption on a global scale, as emphasized by Coinbase CEO Brian Armstrong. Coinbase has long envisioned a global economy primarily driven by cryptocurrencies and is strategically using stablecoins to diversify its revenue streams beyond just crypto trading. The company has entered into a revenue-sharing agreement with Circle for USDC, with Armstrong declaring a “stretch goal to make USDC the number one stablecoin.”
Integration of Crypto Payments
Coinbase is also pursuing ambitious goals for Base, its proprietary network designed for Ethereum-compatible applications.
Armstrong highlighted during the company’s earnings call, “We’re moving with haste to integrate crypto payments across our entire suite of products – we think that will be a big business over time – and we’re also solidifying Base as the number one chain … for start-ups to build on-chain.” He mentioned that fostering partnerships with both global and local players, like Stripe and Yellow Card, could significantly stimulate the growth of stablecoin adoption. He also noted the expansion of stablecoin trading pairs available on Coinbase’s platform.
As part of its updates, Coinbase clients will be able to directly redeem their PYUSD for U.S. dollars on the Coinbase platform, mirroring existing USDC functionality. Previously, users needed to transfer their PYUSD to one of PayPal’s platforms, such as PayPal, Venmo, or Paxos, for redemption purposes.
Additionally, on Wednesday, PayPal announced a new incentive, offering a 3.7% annual rewards rate on PYUSD balances, which will be paid in additional PYUSD in a bid to encourage wider usage of the stablecoin.
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