PayPal and Coinbase team up to make PYUSD easier and more rewarding to use

The partnership removes all trading fees for PYUSD on Coinbase and will soon offer users a 3.7% annual yield.

PayPal and Coinbase have joined forces to make PayPal's stablecoin easier and more rewarding to use.

This partnership, announced on Monday, will remove all trading fees for PYUSD on Coinbase and offer users a 3.7% annual yield on the stablecoin starting this summer.

The companies hope this initiative will encourage broader adoption of PYUSD for everyday payments and help it compete with larger stablecoins like Tether and Circle.

Coinbase users will now be able to buy, sell, and trade PYUSD without any fees. They can also exchange PYUSD for US dollars at a 1:1 rate directly on Coinbase, aiming to simplify cryptocurrency access for newcomers and institutional investors.

Starting this summer, individuals who keep PYUSD in their PayPal or Venmo wallets will earn a 3.7% reward each year. These rewards will accrue daily and be paid out monthly. Users can choose to spend these rewards, convert them to other currencies, or send them to friends.

"We are demonstrating our commitment to an innovative, commerce-ready ecosystem by enabling [PYUSD] for cross-border transfers, vendor payments, and future use cases like payouts and bill pay," said Alex Chriss, PayPal's President and CEO.

Highlighting Coinbase's interest in engaging PayPal's large user base, Brian Armstrong, Coinbase CEO, expressed enthusiasm for the partnership.

"[PayPal's] more than 430 million consumer and merchant accounts offer an unprecedented opportunity to increase stablecoin adoption globally," stated Armstrong in the joint press release.

PYUSD currently has a market value of $860 million, significantly smaller than market leaders Tether's USDT, which stands at $146 billion, and Circle's USDC, valued at $62 billion. This partnership aims to close this gap as the stablecoin market continues to grow, with Standard Chartered projecting it will reach $2 trillion by 2028.

The companies will also explore using PYUSD in decentralized finance and other blockchain systems. This expansion comes as Congress is working on new regulations for stablecoins, which are expected later this year.

Financial markets responded positively to the news. PayPal's stock price rose 3.7% over the past week, outperforming the tech-heavy Nasdaq Composite's 2.3% gain during the same period.

In response to growing competition, market leader Tether is reportedly planning to issue a stablecoin specifically designed for US users.

Stablecoins have become increasingly popular for international payments due to their speed and low cost compared to traditional banking transactions. The PayPal-Coinbase alliance represents a strategic move to gain market share in an increasingly competitive landscape.