PayPal has officially announced the launch of its U.S. dollar-backed stablecoin, PayPal USD (PYUSD). This new digital currency is fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents. Issued by Paxos Trust Company, a New York-regulated cryptocurrency services firm, PYUSD will gradually become available to PayPal customers in the United States.
PYUSD is designed as an ERC-20 token on the Ethereum blockchain, ensuring compatibility with the broader Web3 ecosystem from day one. It will soon be supported by Venmo, PayPal's mobile payment service, and will eventually be accessible to external developers, wallets, and Web3 applications.
Key Features of PayPal USD (PYUSD)
Holders of PYUSD will be able to:
- Transfer the stablecoin between PayPal and compatible external wallets.
- Make peer-to-peer payments using PYUSD.
- Select PYUSD as a payment option during checkout.
- Convert any PayPal-supported cryptocurrency into PYUSD.
The introduction of PayPal’s stablecoin has already positively influenced the company’s stock price, which rose 2.66% following the news. For the crypto community, however, the announcement is a mixed blessing. While it signals a major step toward mainstream adoption of Ethereum and digital assets, it also raises concerns about centralization and potential smart contract risks.
Nevertheless, the launch of a stablecoin by a global payment giant like PayPal is a significant milestone for the entire cryptocurrency industry.
PayPal’s Crypto Journey: From Early Steps to Strategic Moves
PayPal’s involvement with digital assets is not new. The company has been building toward this moment for nearly a decade.
Initial Foray into Crypto Payments
Back in September 2014, PayPal partnered with crypto payment processors like BitPay, Coinbase, and GoCoin. This collaboration allowed merchants using PayPal to accept Bitcoin as a form of payment through the PayPal Payments Hub. At the time, however, the company remained cautious, emphasizing that the move was simply about offering users more payment options.
Deepening Ties with Coinbase
A significant partnership with Coinbase began in 2016 when the exchange integrated PayPal for fiat transactions. By 2018, U.S.-based Coinbase users could withdraw funds instantly to their PayPal accounts. The service later expanded to several European countries in 2019, making fiat withdrawals faster and more convenient for a broader user base.
Internal Blockchain Research and Development
In March 2018, PayPal’s CEO Dan Schulman publicly expressed strong belief in blockchain technology, noting that its potential might even exceed that of cryptocurrencies. Around the same time, the company confirmed it had formed an internal team dedicated to researching blockchain applications.
Pursuing Crypto-Related Patents
That same month, PayPal filed a patent application with the U.S. Patent and Trademark Office (USPTO) for a system designed to accelerate cryptocurrency transactions. The patent proposed using unique private keys to reduce the waiting time required to confirm payments between consumers and merchants.
Investing in Blockchain Startups
PayPal began investing in the blockchain space in April 2019 by participating in the Series A funding round of Cambridge Blockchain. In the years that followed, the company continued to invest in and acquire crypto firms, including cybersecurity company Chaos Labs and digital asset custody provider Curv.
Launching Crypto Buying and Selling
A major step came in 2020 when PayPal, in partnership with Paxos, received a BitLicense from the New York State Department of Financial Services (NYDFS). This allowed U.S. customers to buy, sell, and hold Bitcoin, Ethereum, Bitcoin Cash, and Litecoin directly within their PayPal accounts. By 2022, the company had converted its conditional license into a full BitLicense.
Enabling Crypto Checkout Services
In 2021, PayPal introduced a checkout feature that enabled users to pay merchants with cryptocurrency. During a transaction, crypto held in a user’s PayPal wallet is automatically converted into fiat currency, allowing merchants to receive payments in traditional money while users spend their digital assets.
Developing a Stablecoin
Early last year, PayPal confirmed reports that it was exploring the creation of its own stablecoin. The company emphasized that it would work closely with regulators throughout the development process, ensuring compliance and transparency.
Forming a Blockchain Advisory Council
In February 2022, PayPal established a Blockchain, Crypto, and Digital Currencies Advisory Council. The council includes experts like former CFTC Chairman Timothy Massad, MIT Digital Currency Initiative lead Neha Narula, and other academics and industry leaders, guiding the company on regulatory and technological matters.
Introducing Crypto Transfers
By June 2022, PayPal had enabled U.S. users to send, receive, and transfer supported cryptocurrencies between PayPal accounts and external wallets—a feature highly requested by the crypto community.
Partnering with MetaMask
In December 2022, ConsenSys, the developer of the popular MetaMask wallet, announced a integration with PayPal. This allows U.S. users to buy Ethereum directly through their PayPal accounts within the MetaMask interface. 👉 Explore more strategies for using crypto in payments
Frequently Asked Questions
What is PYUSD?
PYUSD is a U.S. dollar-backed stablecoin launched by PayPal. It is pegged 1:1 to the U.S. dollar and is fully backed by secure assets like cash and U.S. Treasury bonds.
How can I use PayPal’s stablecoin?
You can use it to transfer value between PayPal and external wallets, make peer-to-peer payments, use it at checkout, or convert other cryptocurrencies into PYUSD.
Is PYUSD available internationally?
Initially, PYUSD is rolling out only to PayPal customers in the U.S. There has been no official announcement regarding international availability yet.
What cryptocurrencies does PayPal support?
PayPal currently supports Bitcoin, Ethereum, Bitcoin Cash, and Litecoin for buying, selling, holding, and transferring.
Why is PayPal entering the stablecoin market?
PayPal aims to bridge traditional finance and digital currencies by offering a trusted, compliant, and easy-to-use stablecoin for payments and transfers, enhancing utility for its users.
Is PYUSD regulated?
Yes, PYUSD is issued by Paxos Trust Company, a regulated financial services firm, and operates under the oversight of the New York Department of Financial Services.