What is PayPal USD (PYUSD)?

• PayPal USD (PYUSD) is a stablecoin issued by Paxos Trust Company that aims to track the US Dollar. 
• PYUSD is an ERC20 asset, making it compatible with any Ethereum-based platform or service.
• PayPal says its customers can use PYUSD to make purchases via any supported online marketplace
• PayPal USD is the only stablecoin currently available within the PayPal ecosystem

There are two primary ways that people can access PYUSD:

• Primary market – approved entities can send USD directly to Paxos (the firm that issues PYUSD) and receive PYUSD in return
• Secondary market – individuals can buy and sell PYUSD with cash or crypto assets on Paypal, Venmo, and supporting decentralized applications (dApps) on the Ethereum (ETH) network

The total supply of PYUSD is altered by primary market transactions.

When someone buys PYUSD on the primary market, two things happen: 

• According to Paxos Trust Company’s terms and conditions, the company receives USD and takes any of the following actions
  • Deposits USD into an FDIC-insured bank account
  • Purchases US Government securities (e.g. Treasury Bills)
  • Deposits USD into a money market fund
• Paxos then issues 1 PYUSD to the buyer for each USD received
  • This aims to ensure that there’s at least $1 worth of collateral to support the value of each PYUSD token 

Conversely, when someone sells PYUSD on the primary market, the following actions are taken:

• Seller transfers PYUSD to Paxos Trust Company
• Paxos Trust Company removes $1 worth of collateral for each PYUSD received from one or more custodial accounts and transfers to the seller
• Paxos Trust Company “burns” the received PYUSD, eliminating the tokens from the total supply

Once Paxos mints new PYUSD tokens, anyone can purchase them for $1 each via PayPal, dApps and Venmo on the secondary market.

Additionally, PYUSD can be transferred between Paypal and Venmo accounts, or from one of these platforms directly to any Web3 crypto wallet that supports Ethereum-based assets.

Because it’s built using the ERC-20 standard, PYUSD can also be used to transact on the Ethereum (ETH) blockchain and provide liquidity to DeFi pools.

PYUSD can be used for a variety of purposes across different platforms on the Ethereum (ETH) blockchain. Beyond the Web3 economy, PYUSD can also be used in “real-world” financial transactions in place of USD.

PYUSD holders can transfer their tokens to any Ethereum-compatible wallet and use it on select Ethereum-compatible dApps. For example, PYUSD holders can earn interest on their PYUSD using Curve or borrow against their PYUSD on Aave.

PayPal users can also keep their PYUSD in their PayPal or Venmo account to transfer to friends and family or spend at any online merchant that uses PayPal. 

Any online purchase that goes through PayPal can be made with PYUSD by using their “Checkout with Crypto” feature.

In this way, PYUSD serves many of the same purposes as traditional U.S. dollars, but with the transparency and accessibility of cryptocurrencies.

Anyone with a PayPal account can buy, sell, and transfer PYUSD. 

Once you’ve logged into PayPal, click on the “Finances'' tab in the top menu, and then click on “Crypto.” From there, you’ll see a list of the different types of cryptocurrencies offered on PayPal, including BTC, ETH and PYUSD.

According to PayPal, there are no fees to buy, sell, or send PYUSD to friends and family via PayPal and Venmo, or to make purchases via PayPal in online marketplaces. 

Similarly, holding PYUSD in an account does not incur any fees.

However, PayPal does charge a fee to convert PYUSD for other cryptocurrencies, such as Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). Cryptocurrency exchanges may also charge fees for any secondary market trades using PYUSD.

Transferring PYUSD to and from an Ethereum-compatible wallet incurs separate Ethereum network fees.

Ethereum network fees are variable. You can learn more by reading our Learn Center guide, What is a blockchain gas fee?

Yes, since PYUSD is created as an ERC20 asset, it can be transferred between a PayPal account to Ethereum-compatible wallets and platforms. 

For more information, please refer to PayPal’s instructions on transferring crypto assets.

PYUSD can also be sent back and forth between PayPal and Venmo accounts at zero cost.

Currently, PYUSD is issued on the Ethereum blockchain by Paxos.

All PYUSD funds, whether they’re held on PayPal, Venmo, or in a crypto wallet, can be traced on the Ethereum blockchain. PYUSD, like any other cryptocurrency, has a custom “token address.” 

The official token address for Paxos-issued PYUSD is 0x6c3ea9036406852006290770BEdFcAbA0e23A0e8. 

All PYUSD transactions, as well as the total supply of tokens, can be checked at any time here. 

This transparency is beneficial for several reasons, including:

• It allows PYUSD holders to verify that they hold “genuine” PayPal PYUSD and not simply a token called “PYUSD,” which anyone can create .
• It shows every PYUSD transaction ever made, which allows anyone to see a clear and provable history of their PYUSD activity.

You can find more information on token addresses and the best practices to consider when making crypto transactions in our article How to safely send and receive cryptocurrency.

According to Paxos, PYUSD is backed by an equivalent amount of U.S. dollar bank deposits, U.S. Treasuries, and U.S. Treasury reverse repurchase agreements held in custody by Paxos.

Investing in crypto assets is risky and each token can have its own set of risks. 

Although other general crypto asset risks may still apply to stablecoins, specific risks associated with stablecoins that may impact their price or value include:

• Issuer risk: The issuer of the token could face regulatory or legal issues, become insolvent or face operational or other issues that lead to a 'depegging' or devaluation of the token. The issuer may also face operational or financial issues that lead to a failure in their ability to allow tokens to be redeemed for any underlying collateral
• Counterparty risk: The assets collateralising the token may be held by financial institutions or other third parties which could become insolvent or face other failures which could result in a loss of the collateral associated with the token.

While the utility of most stablecoins is limited to on-chain activity (interaction with dApps, etc.), PYUSD is linked to PayPal, the largest online payment processing provider in the world. 

As a result, PYUSD can be used in a way that most other stablecoins and cryptocurrencies cannot – to purchase goods and services over the internet through platforms that are already integrated with PayPal.

If you’re interested in purchasing PYUSD, you can find it on Kraken. Sign up for a free account today to get started with PYUSD and hundreds of other digital assets.