Understanding Paypal’s Stablecoin: What is PYUSD?

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Feb 7, 2024
| Updated Feb 7, 2024

Coins spiraling in a circle

If you have ever made any kind of online payment, you’ve surely heard of PayPal. Simply, they’ve been at the forefront of the digital payment revolution for over 20 years. But leading innovation in payments is an ongoing challenge that requires new technologies, something which PayPal is all too familiar with. 

To make financial services more convenient, affordable, and secure, PayPal launched PYUSD, a stablecoin pegged to the United States Dollar.

But what is PYUSD exactly?

What is PYUSD All About?

PYUSD is a stablecoin pegged to the United States Dollar and issued by Paypal. To explain, via PayPal, you can always buy or sell 1 PYUSD for 1USD.

To understand what that means, let’s first explore what a stablecoin is. 

What is a stablecoin?

Stablecoins are simply a crypto asset designed to retain the same value as another asset such as a fiat currency (like USD), or even a commodity (such as gold). These types of assets allow you to avoid the potential volatility of traditional cryptocurrencies while reaping the benefits of permissionless peer-to-peer transfer of assets. They essentially operate as fiat on-chain. 

Stablecoins come in a few different types; such as algorithmic, crypto-backed, commodity-backed, or fiat-backed.  Each of these types has a slightly different method of retaining its value and their authority structures also vary. To explain, it’s a common misconception that algorithmic coins are more decentralized. The way a stablecoin operates—from how centralized it is to how the coin is backed—works more on a case-to-case basis instead. 

So with that in mind, what are the features of PYUSD exactly?

PayPal USD (PYUSD): Explained

PYUSD is US dollar-denominated, easily redeemable, and transparent stable cryptocurrency. It’s also fully backed by US dollar deposits, US treasuries, and similar cash equivalents. 

Dan Shulman, former president and CEO of PayPal said, “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar”. Thus with this new stablecoin, PayPal aims to bridge the gap between fiat and web3 for consumers, merchants, and developers.

With PayPal’s long-standing expertise in payments and the flexibility and permissionlessness of public blockchain networks, PYUSD is opening the door to web3 exploration. Since PYUSD is issued as an ERC-20 token on the Ethereum blockchain, it’s easy to connect digital and fiat currencies seamlessly. That also means it’s compatible with countless existing wallets, web3 applications, and exchanges (both decentralized and centralized). 

So, if you’re new to web3, it may just be your perfect entry point to the crypto ecosystem. But what is it for exactly?

What is PYUSD for?

In a nutshell, PYUSD is for connecting the worlds of TradFi and crypto, using a digital currency that is stable, open, and programmable. But there’s a bit more to it than that. So, let’s explore some of the top use cases for PayPal USD.

Seamless and Simple Transfer of Assets

Like many other stablecoins, PYUSD is perfect for peer-to-peer transfer of assets, i.e. sending funds directly to your friends or family and back. Seeing as transactions on blockchain networks are much faster than those handled by traditional payment rails, you can send funds almost instantly: without suffering extra waiting times that typically occur when funds cross international borders.

PYUSD also allows you to transfer funds between PayPal and compatible external wallets, between PayPal and Venmo wallets without fees, and fund purchases via PayPal’s checkout process. You can even swap your PYUSD to any of the other cryptocurrencies currently supported by PayPal directly inside your account. In short, PYUSD makes the transfer of assets simple, fast, and effective.

To explore web3 apps and services

The next important use case for PYUSD is for exploring web3 apps and services. To explain, PYUSD is designed to reduce friction for in-experience payments in virtual environments—meaning you can easily use PYUSD to pay for services inside blockchain games or even metaverse platforms.

In addition, PYUSD is easily compatible with third-party exchanges, wallets, decentralized applications (dApps), and NFT marketplaces too. It lends itself to improving the user experience in web3 apps and services.

To aid Developers 

Finally, PYUSD can also help developers integrate web3 payments. Since it adopts the existing ERC-20 token standard, it is easy to integrate into both existing and newly developed wallets and dapps. It helps developers create new ways to connect TradFi to the crypto ecosystem; allowing for new use cases and opening up the ecosystem to new users.

Is PYUSD backed by reserves?

In short, yes: PayPal USD is backed 100% by US Dollar deposits, short-term US Treasuries and similar cash equivalents. This means PYUSD is redeemable 1:1 for US dollars, thus its value always remains the same.

This is extremely important, as many stablecoins have struggled to maintain their peg, and backing a stablecoin 1:1 is currently the most trustworthy method for keeping a coin stable.

While PYUSD is available via PayPal, it is issued by Paxos Trust Company. Paxos, a fully licensed limited-purpose trust company is subject to regulatory oversight by the New York State Department of Financial Services. It also publishes a monthly reserve report and third-party attestation of the value of the reserve assets.

PayPal and Paxos are committed to ensuring the public availability of reports as a testament to their commitment to transparency. You can easily find all of these reports on the official Paxos site.

How do I buy PYUSD?

PYUSD is available to buy via PayPal. It’s as simple as visiting the PayPal or Venmo app and buying your coins. From there, you will be able to manage your PYUSD directly inside your PayPal account. Plus, buying, selling, holding, and transferring PYUSD within your account doesn’t cost a thing. However, if you want to swap it for another cryptocurrency, you will have to pay a fee.

It’s also important to note that you can protect your PYUSD directly with a Ledger Device. With the Ethereum app installed on your device, you can simply and easily store and manage your PYUSD with the added security of a hardware wallet. Securing your PYUSD with a Ledger device means your PYUSD is protected from online threats. It also has the additional security of self-custody, meaning the only person who can manage your account is you.

PayPal USD: Final Thoughts

PayPal has been at the forefront of new transaction technologies and understands the importance of education regarding the understanding and adoption of digital currencies. In short, it’s focused on increasing consumer and merchant comprehension of cryptocurrencies, stablecoins, and CBDCs. So, while PYUSD offers an accessible way to enter the crypto ecosystem, easily on-ramp, and start exploring, it also provides educational content to help users understand the risks and possibilities of using these types of assets. 

So, if you’re ready to start exploring the web3 ecosystem, perhaps you might want to consider PYUSD as your starting point. With PYUSD, you have the confidence of trusting payment services experts—with the track record and transparency model to prove it.

And of course, if you are storing any cryptocurrencies, stable or otherwise, it’s always best to protect them with a hardware wallet. Luckily, PYUSD is completely compatible with Ledger devices, meaning you can easily hold and manage your funds without worrying about online threats.

So what are you waiting for? 

Manage your PYUSD with ease within the Ledger Ecosystem, where you have the benefit of security and self-custody.

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