In a bold move to boost the adoption of PayPal USD (PYUSD), Coinbase has announced it is removing fees for purchases of the stablecoin. This decision marks a significant step in the growing competition among payment-focused stablecoins and underscores Coinbase’s ambition to expand on-chain payment opportunities for both retail consumers and institutional users. With the stablecoin market dominated by giants like Tether (USDT) and Circle (USDC) , PayPal USD has struggled to gain traction since its launch in 2023. However, Coinbase’s latest initiative signals renewed efforts to position PYUSD as a viable player in the global digital payments landscape.
Accelerating PYUSD Adoptio
In a blog post released Thursday, Coinbase outlined its strategy to “accelerate the adoption, distribution, and utilization” of PayPal USD. Despite being pegged to the U.S. dollar, PYUSD has lagged behind competitors, holding a market cap of just $730 million —a mere fraction compared to Tether’s 66.5% market share and Circle’s 28.3% dominance, according to CryptoQuant.
By eliminating fees for PYUSD purchases, Coinbase aims to lower barriers for users and incentivize broader usage of the stablecoin. Additionally, the exchange will now allow users to redeem their PYUSD directly for U.S. dollars on the Coinbase platform—a feature previously unavailable. This mirrors the functionality offered for USDC, further streamlining the user experience and making PYUSD more accessible.
The collaboration between Coinbase and PayPal extends beyond fee removal. Both companies are exploring “stablecoin-based solutions” for global commerce, decentralized finance (DeFi), and other on-chain platforms. These efforts align with the growing trend of institutions leveraging stablecoins for efficient cross-border payments outside traditional financial systems.
Alex Chriss, PayPal president and CEO has expressed his excitement toward this events:
The Stablecoin Race Heats Up
The competition for payment-focused stablecoins is intensifying as expectations grow that Congress will pass its first major piece of crypto legislation focused on stablecoins in the third quarter. Historically, stablecoins have been primarily used for trading and borrowing within the crypto ecosystem. However, their appeal has expanded as institutions increasingly adopt them for transferring value globally—offering cheaper and faster alternatives to traditional banking systems.
This push has sparked innovation across the industry. Earlier this month, Circle, the issuer of USDC, filed to go public and launched a payments and remittance network targeting financial institutions—a direct challenge to PayPal’s core business. Meanwhile, Ripple, known for its cross-border payment solutions and XRP cryptocurrency, introduced its own stablecoin, Ripple USD (RLUSD) , in December.
Against this backdrop, PayPal’s vast two-sided network of over 430 million consumers and merchants presents a unique opportunity to drive global stablecoin adoption. As Brian Armstrong , Coinbase’s CEO, stated:
“PayPal’s network offers an unprecedented opportunity to increase stablecoin adoption globally.”
Coinbase’s Vision for a Crypto-Powered Economy
Coinbase’s decision to eliminate PYUSD fees is part of a broader strategy to build a global economy powered by cryptocurrency. The company views stablecoins as a critical tool for diversifying its revenue streams beyond crypto trading. Notably, Coinbase already shares 50% of USDC revenue with Circle through an existing partnership. During the company’s most recent earnings call, Armstrong expressed a “stretch goal” to make USDC the leading stablecoin—a testament to the exchange’s commitment to fostering stablecoin growth.
Coinbase is also heavily investing in Base, its Ethereum-compatible blockchain network designed for decentralized applications. Armstrong emphasized the importance of integrating crypto payments across Coinbase’s product suite, stating: “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.”
To achieve this, Coinbase is forging partnerships with global players like Stripe and Yellow Card to drive adoption and expand stablecoin utility. The platform has also added numerous stablecoin trading pairs, further solidifying its role as a hub for stablecoin activity.
PayPal’s Push for PYUSD Adoption
PayPal is equally determined to boost PYUSD adoption. On Wednesday, the company introduced a 3.7% annual rewards rate on PYUSD balances, paid in additional PYUSD. This incentive aims to attract users and encourage them to hold and transact with the stablecoin. By offering competitive yields, PayPal hopes to differentiate PYUSD in a crowded market and establish it as a preferred option for digital payments.
According to Alex Chriss , PayPal’s president and CEO, the collaboration with Coinbase represents an exciting opportunity to innovate and expand the use cases for PYUSD. “We are excited to drive new, exciting, and innovative use cases together with Coinbase and the entire cryptocurrency community,” Chriss said. “Our goal is to put PYUSD at the center and drive further utility and adoption for digital currencies.”
Challenges Ahead
Despite these ambitious initiatives, challenges remain for PYUSD. Competing against established players like Tether and Circle will require significant effort to overcome their entrenched positions in the market. Additionally, regulatory uncertainty looms large, with lawmakers still debating how to regulate stablecoins effectively.
Moreover, consumer trust remains a key hurdle. While stablecoins offer many advantages, concerns about transparency, security, and counterparty risk persist. For PYUSD to succeed, both Coinbase and PayPal must ensure robust safeguards and maintain open communication with users.
A New Era for Stablecoins
The collaboration between Coinbase and PayPal highlights the evolving role of stablecoins in reshaping global payments. By removing fees, expanding redemption options, and exploring new use cases, both companies are positioning themselves at the forefront of this transformation.
As the race for payment-focused stablecoins heats up, the industry is witnessing a convergence of innovation, regulation, and institutional adoption. Whether PYUSD can carve out a meaningful niche in this competitive landscape remains to be seen. However, one thing is clear: the push to integrate stablecoins into everyday transactions is accelerating, paving the way for a more inclusive and efficient financial system.
For now, Coinbase and PayPal’s efforts serve as a reminder of the potential—and challenges—of building a truly global digital economy powered by stablecoins.
