What is PayPal USD (PYUSD)? Pros and Cons, FAQs

PayPal USD (PYUSD) is a stablecoin cryptocurrency issued by PayPal, in partnership with Paxos. On August 7, 2023, the payment giant PayPal unexpectedly launched its own stablecoin on the Ethereum blockchain.

So what exactly is PayPal USD? What role does it play in the PayPal payment system? Let’s find out together with AZCoin in the following article.

What is PayPal USD?

PayPal USD (PYUSD) is an ERC-20 stablecoin on the Ethereum blockchain platform issued through a partnership between PayPal and Paxos – the stablecoin company behind Binance USD (BUSD) from the Binance exchange.

Similar to traditional stablecoins like Tether USD (USDT) and USD Coin (USDC), PayPal USD is also backed by the US dollar, short-term US Treasury bonds, and other cash-equivalent assets. The launch of PYUSD has been planned for a while by PayPal and Paxos, but had to be postponed due to regulatory issues faced by Paxos by the US government in February 2023.

How does PYUSD differ from other types of Stablecoins?

PYUSD stands out with support from a well-established financial organization like PayPal. Unlike stablecoins pegged to a single asset, PYUSD is backed by PayPal’s reserves, helping to enhance the credibility of this currency.

As a payment platform serving nearly 500 million accounts and proudly holding over 50% of the online payment market share, PayPal USD will benefit from a large user base and the brand recognition of PayPal. However, PYUSD also faces challenges such as ensuring regulatory compliance and maintaining decentralization.

What can you do with PYUSD?

PayPal USD opens up a world of possibilities for users within the PayPal ecosystem. This versatile stablecoin allows you to make purchases, send and receive payments, and seamlessly explore the world of digital assets.

For example, a freelancer can receive their work income via PYUSD, utilize it to purchase goods online, convert it to their local currency, or even stake it on DeFi platforms for additional income generation. Here are a few use cases for the PYUSD stablecoin:

Buy and Sell PYUSD on PayPal

As a verified PayPal user, you can buy and sell PYUSD directly from your account. This feature will be available on both the website and mobile application.

Convert PYUSD to Purchase other Cryptocurrencies Supported on PayPal

Use the Convert feature on PayPal to directly purchase other cryptocurrencies that are supported on PayPal. As of August 2023, PayPal supports the following cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC).

Note: You will incur a transaction fee deducted from your PayPal balance as part of the exchange rate.

Pay for Goods and Services

Utilize PayPal’s ‘Checkout with Crypto’ feature to purchase goods and services from millions of online merchants globally. PayPal will sell the PYUSD so you can cover your purchase at partner stores that accept PayPal as a payment method.

Send and Receive Payments with Zero Fees within the US

Send payments to your friends and family within the US using PayPal USD without incurring any transaction fees.

Additional Use Cases for the PYUSD Stablecoin

• Streamlining Digital Transactions: PYUSD facilitates seamless payments within digital platforms due to its stability and direct peg to the US dollar.
• Facilitating Remittances: PYUSD offers an efficient and cost-effective way to send money abroad, with stable value and fast processing times. Sending money via PayPal USD can be processed within minutes, unlike traditional wire transfers which may take days to settle.
• Promoting Mainstream Cryptocurrency Adoption: PayPal’s PYUSD stablecoin serves as an accessible entry point for cryptocurrency novices and will be integrated with Venmo.
• Accessing Web3 DApps: PYUSD’s compatibility with Web3 applications could enhance its adoption within the digital marketplace.
• Supporting Merchant Payments: Merchants can accept PYUSD to avoid credit card processing fees and simplify transactions.
• Hedging Against Cryptocurrency Market Volatility: PYUSD maintains a stable value pegged to the US dollar, providing stability amidst market fluctuations.
• Facilitating Micropayments and the Tokenized Economy: PYUSD enables micro-transactions and acts as a base for the tokenized economy.
• Managing Risk and Trading in the Cryptocurrency Market: PYUSD can be used for hedging against price volatility and serves as a stable reference point for portfolio valuation.
• Integrating with E-commerce Platforms: PYUSD can be integrated as a payment option within e-commerce platforms, providing a secure and efficient alternative to traditional payment methods.

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Advantages of PayPal USD

Safety

The reserves of PYUSD are closely monitored according to the regulations of the New York State Department of Financial Services (NYDFS). NYDFS oversight ensures that PYUSD reserves are safe and ready to meet their payment obligations. This provides peace of mind for consumers using PayPal and helps protect them from the risk of losing money.

Furthermore, under New York banking law, in the event Paxos becomes unable to pay, customer assets in the form of PYUSD will not be used to settle Paxos debts as they are completely segregated from Paxos’ assets.

Stability

PYUSD is designed to maintain a stable value of 1 USD. PYUSD is backed by deposits in US dollars, US Treasury bonds, and cash equivalents, ensuring users can trust the value of their PYUSD holdings.

Ease of use

Users can buy, sell, hold PYUSD within the PayPal app or website easily. They can also send PYUSD to other US users on PayPal without any fees. Or send to Ethereum wallet addresses in just a few steps.

The Role of PayPal USD

PayPal USD can be used for online shopping, bill payments, online services, and sending and receiving money. PayPal USD plays a significant role for PayPal as it allows the company to offer new services and enhance its existing ones.

Additionally, PayPal USD helps PayPal expand into new markets such as the cryptocurrency market, enabling investors to use PayPal USD for safer and easier cryptocurrency transactions.

Currently, PayPal allows users to buy and hold 4 cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC).

Initially, PayPal will allow users to use PYUSD to buy, sell, and trade among the mentioned coins, as well as make payments through PayPal and Venmo apps. In the near future, PayPal may expand to allow deposits and withdrawals of PYUSD outside of PayPal.

Summary

PayPal USD (PYUSD) plays a crucial role in PayPal’s development strategy. It helps PayPal expand its market share into emerging markets like crypto, provide new services, and enhance user experience.

Through this article, we hope that readers have grasped and understood the basic information about PayPal USD to aid in their research and investment process. AZCoin will not be held responsible for any investment choices you decide to make. For further information, please consult the indemnity page. Wishing you success!