Coinbase Eliminates Fees for PYUSD Purchases to Boost Adoption

Coinbase has announced the cancellation of fees for purchasing PayPal's dollar-pegged stablecoin, PYUSD. This move is part of a broader effort to increase the usage of PYUSD and to expand on-chain payment opportunities for both consumers and institutional users. Coinbase aims to accelerate the adoption, promotion, and usage of PYUSD, which has lagged in the market since its launch in 2023. The stablecoin has a market capitalization of approximately $7.3 billion, holding less than 1% of the market share in the dollar-pegged stablecoin sector. Tether's USDT and Circle's USDC dominate the market with 66.5% and 28.3% market shares, respectively.

PayPal has expressed that the two companies will collaborate on "stablecoin-based solutions" to facilitate global fund transfers and management, particularly in the commercial sector. They will also explore the potential use cases of PYUSD in decentralized finance and other on-chain platforms. PayPal's President and CEO, Alex Chris, stated that the company is excited to work with Coinbase and the broader cryptocurrency community to drive new, exciting, and innovative use cases for PYUSD, enhancing its utility and adoption among developers, customers, and other users.

The competition in the stablecoin payment sector is intensifying, with the anticipation of the first U.S. congressional legislation focused on stablecoins expected to pass in the third quarter. Historically, stablecoins have been primarily used for trading and lending within the cryptocurrency market. Recently, they have become more attractive to institutions seeking to transfer value globally, particularly dollar value, at lower costs and with greater efficiency outside the traditional financial system.

Earlier this week, Circle, which has a revenue-sharing agreement with Coinbase, launched a payment and remittance network for financial institutions, posing a challenge to PayPal's core business. Ripple, the creator of the XRP cryptocurrency, introduced its dollar-pegged stablecoin, RLUSD, in December of last year. Coinbase's CEO, Brian Armstrong, noted that PayPal's network of over 430 million consumers and merchants presents an unprecedented opportunity to increase the global adoption of stablecoins.

Coinbase has long been committed to building a global economic system powered by cryptocurrency, using stablecoins as a means to diversify its revenue streams beyond cryptocurrency trading. The company has an agreement with Circle to share 50% of the revenue from the USDC stablecoin, with Armstrong stating that the ultimate goal is to make USDC the top stablecoin. Coinbase also has ambitious plans for its self-built network, Base, which is compatible with Ethereum applications. Armstrong mentioned that the company is rapidly integrating cryptocurrency payment functionality across its product suite, believing that this will become a significant business over time. Additionally, Coinbase is strengthening Base's position as the preferred chain for startups to build on-chain applications.

Coinbase users will now be able to directly exchange their PYUSD holdings for dollars on the Coinbase platform, similar to the functionality available for USDC. Previously, users had to transfer their PYUSD to one of PayPal's platforms (PayPal, Venmo, or Paxos) to perform the exchange. On Wednesday, PayPal introduced a 3.7% annual reward rate for PYUSD balances to encourage more PYUSD payments and increase the stablecoin's adoption rate.