Coinbase is teaming up with PayPal to promote its PayPal USD stablecoin.
Mixing Coinbase’s crypto credentials with PayPal’s huge payment network could mean more crypto adoption.
PayPal USD lags behind other stablecoins, but it has big plans.
Coinbase (NASDAQ: COIN) and PayPal (NASDAQ: PYPL) have teamed up to make the payment giant’s stablecoin, PayPal USD (CRYPTO: PYUSD), easier to buy and use. Coinbase is one of the leading U.S. crypto exchanges, and PayPal is a major player in e-commerce and online payments.
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.
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Let’s look at why the deal matters and how increased stablecoin usage is good for the wider crypto ecosystem.
On April 24, Coinbase and PayPal said they had deepened their partnership to increase the adoption of the PYUSD stablecoin. PayPal wants to integrate PYUSD into more of its products to make payments cheaper and faster for merchants.
The deal means:
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 security and regulatory concerns. 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.
PayPal introduced its dollar-pegged stablecoin 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 player in the stablecoin race.
Stablecoins are a significant force in the crypto world. According to CEX.IO, stablecoin transfer volume reached $27.6 trillion in 2024 — more than the combined volume of Visa and Mastercard. Stablecoins bring many of the advantages of blockchain technology, such as speedy, low-cost transactions, without the volatility of other cryptocurrencies.
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People talk about 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.
Sure, prices won’t decrease dramatically either — unless the stablecoin fails, which is what happened with TerraUSD in 2022. People put a small part of their investment cash into cryptocurrency because they think it might increase in value over time, and stablecoins won’t do this. 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 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.
One reason cryptocurrency is such a risky investment is that we don’t know how it will evolve. However, the more mainstream crypto becomes, the better its chance of success. That’s why PayPal’s commitment to bolstering its stablecoin matters. PayPal has more than 425 million user and merchant accounts. In 2024, it handled almost $1.7 trillion in payments.
If Bitcoin, Ethereum, and other cryptocurrencies are to achieve their potential, people need to use them. That might mean putting some Bitcoin in your portfolio. Or using applications built on Ethereum’s blockchain. Or using PYUSD to pay for your next pizza delivery. Or a combination of all three.
Regulatory clarity, institutional investment, and improved infrastructure all play a part in supporting crypto, but adoption is crucial. And that’s why this Coinbase-PayPal deal could be important for crypto in the long term.
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Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, Mastercard, PayPal, and Visa. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
Here’s How the Coinbase-PayPal Stablecoin Deal Could Rock Crypto was originally published by The Motley Fool
