Coinbase (COIN) and PayPal (PYPL) Have Teamed Up to Make the Payment Giant's Stablecoin, PayPal USD (PYUSD), Easier to Buy and Use

Coinbase (COIN 1.77%) and PayPal (PYPL 2.81%) have teamed up to make the payment giant's stablecoin, PayPal USD (PYUSD -0.00%), easier to buy and use.

Coinbase (NASDAQ:COIN) and PayPal (NASDAQ:PYPL) are teaming up to make the payment giant's stablecoin, PayPal USD (CRYPTO:PYUSD), easier to buy and use.

What Happened: Coinbase and PayPal are deepening their partnership to help drive the adoption of the PYUSD stablecoin, the two companies said on Monday, April 24.

PayPal is planning to add the stablecoin to more of its products to make payments cheaper and faster for merchants, and they will also work together on ways to use PYUSD in decentralized finance.

The two companies are also planning to collaborate on ways to use PYUSD in decentralized finance (DeFi). People invest in cryptocurrencies in the hope that their value will increase. But most types of stablecoins are designed to hold a nearly constant value.

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Why It's Important: As one of the leading U.S. crypto exchanges and a major player in e-commerce and online payments, Coinbase and PayPal could play a role in increasing the adoption of cryptocurrencies.

Stablecoins are cryptocurrencies that are pegged to real-world assets such as the U.S. dollar. As such, they offer a blockchain-based payment method that doesn't suffer from crypto’s usual volatility. There’s fierce competition for market share among the various stablecoins, and PayPal’s Coinbase deal could give it a serious leg up.

Let’s look at why the deal matters and how increased stablecoin usage is good for the wider crypto ecosystem.

Coinbase and PayPal’s PYUSD deal

On April 24, Coinbase and PayPal said they were deepening their partnership to help drive the adoption of the PYUSD stablecoin. PayPal is planning to add the stablecoin to more of its products to make payments cheaper and faster for merchants.

For crypto investors, one important part of the deal is that the two companies plan to collaborate on ways to use PYUSD in decentralized finance (DeFi). DeFi allows people to manage money without relying on intermediaries like banks. An example would be earning interest through peer-to-peer lending.

Increased adoption of DeFi is somewhat of a work in progress. It’s hampered by various issues, from limited utility to critical vulnerabilities and regulatory issues. It could be a real-world use case for cryptocurrency, but it has a long way to go before people trust it with their cash.

Stablecoins and crypto investment

PayPal launched its dollar-pegged stablecoin earlier in 2023, but it has yet to take significant market share from current leaders, Circle's USDC and Tether. This deal increases PayPal’s potential to disrupt the status quo and become a serious contender in the stablecoin market.

Stablecoins are a significant part of the crypto market. According to CEX.IO, stablecoin transfer volume reached $27.6 trillion in 2024 -- more than the combined volume of Visa (NYSE:V) and Mastercard (NYSE:MA). They offer many of the advantages of blockchain technology, such as speedy, low-cost transactions, without the volatility of other cryptocurrencies.

People often describe stablecoins as a relatively safe way to dip your toe in the crypto waters, but that’s not entirely true. First, stablecoins are not as safe as people like to think. Second, by nature, their prices won’t increase the way Bitcoin or Ethereum might. And third, a stablecoin that’s pegged to the U.S. dollar can’t act as a hedge against the devaluation of that same currency.

Of course, the prices also won’t decrease dramatically -- unless the stablecoin fails, which is what happened with TerraUSD in 2024. People put a small part of their investment cash into cryptocurrency because they think it might increase in value over time. But you won’t get rich slow with stablecoins. If you’re holding stablecoins as a safe investment, you’d be better off leaving your money in the bank.

Stablecoins can sometimes generate passive income in the form of interest paid on deposits. For example, PayPal told Bloomberg that it will offer a 3.7% yield on PYUSD holdings, starting later this year. But that’s also more complicated than it seems. Unlike dollars in a bank, stablecoins are not protected by Federal Deposit Insurance Corporation coverage.

Some stablecoin issuers, such as PYUSD and USDC, say that they back every coin issued with real-world assets. This helps them maintain their peg and offers protection against the stablecoin equivalent of a bank run. Even so, there’s a lot of uncertainty about what consumer protections apply to these bank-like services. Regulation is in the pipeline, but not yet in place.

Why the Coinbase-PayPal deal could rock crypto

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