In a move that could reshape the competitive landscape of digital currencies, PayPal and Coinbase have joined forces to promote the use of the PayPal USD ($PYUSD) stablecoin.
Announced on 24 April, the new partnership eliminates all trading fees for $PYUSD on Coinbase’s platform, allowing users to buy, sell, and trade the token without incurring additional costs.
This strategic decision is aimed at accelerating adoption by reducing financial barriers and making $PYUSD more attractive to retail and institutional users alike. In addition to the zero-fee structure, Coinbase will also offer a seamless 1:1 conversion of $PYUSD to US dollars directly on its exchange.
This development could enhance user trust and increase the use of $PYUSD across decentralised finance (DeFi) platforms and broader blockchain-based ecosystems.
The two companies have also signalled intentions to explore future use cases for $PYUSD, including integration with DeFi applications. This collaborative effort aligns with PayPal’s growing commitment to digital assets and decentralised technology.
The President and CEO of PayPal, Alex Chriss, highlighted the importance of this partnership. “Our longstanding collaboration with Coinbase has prioritised seamless integration, empowering PayPal users to effortlessly fund crypto transactions. With PYUSD, we’ve aligned our payments expertise with Coinbase’s infrastructure to unlock broader commercial possibilities”, he said.
This partnership builds on previous collaborations between the companies, including a 2021 integration that allowed Coinbase users to fund their accounts with PayPal and withdraw fiat currency.
Even earlier, in 2013, PayPal acquired the company behind the mobile payments app Venmo for $800 million—a foundational move that brought Venmo into PayPal’s growing fintech ecosystem.
Coinbase, one of the largest cryptocurrency exchanges in the United States, is also looking to deepen its role in the stablecoin sector.
The company has announced that it will support $PYUSD across its custody and trading platforms and plans to develop new on-chain use cases to support institutional adoption.
Chriss also took to social media to express excitement, saying, “Incredibly excited to work with Brian Armstrong and the Coinbase team to create more seamless ways for Coinbase’s users to access $PYUSD and to collaborate on future use cases”.
Expanding PYUSD across platforms and blockchains
PayPal launched $PYUSD on the Ethereum blockchain in August 2023, positioning it as a regulated, fiat-backed stablecoin aimed at mainstream adoption.
Since then, the company has worked aggressively to increase the stablecoin’s utility and visibility across the digital finance space.
In May 2024, PayPal expanded $PYUSD to the Solana blockchain, enhancing transaction speed and reducing fees—key factors that influence user adoption.
The integration with Solana marked a critical step in making $PYUSD a scalable option for faster and cheaper payments.
To further strengthen its stablecoin offering, PayPal partnered with Anchorage Digital, a federally chartered crypto custodian, to launch a stablecoin rewards programme.
At the same time, the company entered into a partnership with crypto platform MoonPay to facilitate the purchase of $PYUSD using a wide range of traditional payment methods, including debit cards and digital wallets.
Perhaps the most attention-grabbing move from PayPal has been its announcement of a 3.7% annual yield on $PYUSD holdings for US users. Set to begin in summer 2025, this rewards programme will apply to balances held in PayPal and Venmo wallets.
The yield will be calculated daily and distributed monthly in $PYUSD, with options to convert the rewards into fiat, send them to other users, make international transfers via Xoom, or use PayPal Checkout for purchases.
“The rewards are here to push $PYUSD as a form of payment”, said PayPal’s senior vice president of blockchain, Jose Fernandez da Ponte. His comments reflect the company’s wider aim to position $PYUSD not just as a store of value, but as a practical tool for everyday transactions.
$PYUSD currently has a market capitalisation of $866 million, with a daily trading volume of $24.3 million, according to data available online. However, the stablecoin still trails behind leading competitors.
Tether ($USDT) leads the sector with a market cap of $146 billion, followed by USD Coin ($USDC) at $62 billion. These two tokens dominate the $228 billion global stablecoin market.
Despite its relatively smaller market share, PayPal sees an opportunity to leverage its vast payment infrastructure—including Venmo and Xoom—to position $PYUSD as a strong contender.
The integration across various platforms offers a potential competitive edge, particularly in areas like remittances, checkout services, and cross-border payments.
A heavily regulated and competitive market
While PayPal’s approach is ambitious, regulatory challenges and strong competition from existing players could limit how far $PYUSD can go.
In Europe, the Markets in Crypto-Assets (MiCA) regulation has redefined the rules for stablecoins, classifying them as electronic money.
This classification prohibits interest payments, which could block the implementation of yield programmes like PayPal’s in the region.
In the United States, proposed legislation such as the STABLE Act and the GENIUS Act could similarly restrict stablecoin issuers from offering interest or rewards.
If passed, these laws may impact the sustainability of PayPal’s reward programme, potentially undermining its long-term strategy.
Unlike other reward schemes that rely on reserve interest, PayPal may be using its own capital to fund the 3.7% annual yield—an approach that carries both opportunity and risk.
While it enables PayPal to attract users in the short term, maintaining the programme amid regulatory uncertainty and market pressure could be costly.
Chriss has pointed to the broader potential of stablecoins to reduce payment processing costs across PayPal’s suite of services, including Venmo and Xoom.
“We’re innovating and building the future of commerce using the latest technologies—from AI to blockchain to stablecoins”, he said.
Still, the stablecoin landscape is becoming increasingly crowded. Fintech giants like Robinhood, Revolut, Stripe, and Fidelity are also launching or exploring stablecoins.
Coinbase, which offers a 4.1% yield on $USDC, remains a formidable competitor. The slightly higher return could attract yield-focused users, though PayPal’s integration into everyday payment services gives it a unique value proposition.
Another key concern is how PayPal’s programme will fare under future regulations that may mirror Europe’s MiCA framework. If interest-based stablecoin rewards become restricted or banned, PayPal may need to pivot its strategy to maintain user interest.
Nonetheless, $PYUSD’s integration into PayPal’s payments infrastructure allows the company to create a closed-loop system where users are rewarded for keeping and using the stablecoin within the ecosystem.
This strategy could lead to increased transaction volume and help position $PYUSD as a serious contender in digital payments.
The partnership between PayPal and Coinbase represents a bold move to elevate $PYUSD in the stablecoin hierarchy. Through fee eliminations, blockchain expansion, and a high-yield reward programme, the companies are working to make $PYUSD a preferred option for both consumers and developers.
