PayPal USD (PYUSD) is a U.S. dollar-backed stablecoin launched by PayPal and issued by Paxos Trust Company. As a fully reserved digital currency, it is designed to combine the stability of traditional fiat with the flexibility of blockchain technology. Each PYUSD token is backed by secure assets, including U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents.
What Is PayPal USD (PYUSD)?
PYUSD is an Ethereum-based ERC-20 token, meaning it operates on one of the world’s most widely used blockchain networks. This allows for broad compatibility with external wallets, decentralized applications, and exchanges. Launched in August 2023, PYUSD aims to serve as a reliable medium of exchange for everyday transactions, online commerce, and cross-border payments.
One of the core features of PYUSD is its redeemability. Users can exchange 1 PYUSD for 1 U.S. dollar at any time, providing full transparency and trust. Paxos, the issuer, publishes monthly reserve attestation reports verified by independent accounting firms to ensure full backing and regulatory compliance.
How PayPal USD Works
PYUSD integrates seamlessly within the PayPal ecosystem and beyond. Users can:
- Transfer PYUSD between PayPal accounts and external Ethereum-compatible wallets.
- Use it for checkout at millions of online merchants, with automatic conversion to local currency at the point of sale.
- Buy, sell, and hold PYUSD alongside other cryptocurrencies within PayPal’s platform.
- Employ it for peer-to-peer payments, freelancer payouts, and remittances with minimal fees.
Its underlying blockchain technology ensures that transactions are secure, fast, and traceable, reducing the costs and delays often associated with conventional banking systems.
Key Benefits and Use Cases
PYUSD offers a range of practical applications:
- Global Payments: Facilitate low-cost international transfers without traditional intermediaries.
- E-Commerce: Shop online using a stable digital currency that eliminates exposure to crypto volatility.
- Freelancing and Business Payments: Receive and send payments quickly across borders.
- Financial Management: Use PYUSD for budgeting, savings, or as a digital dollar alternative with easy convertibility.
- Web3 and DeFi Integration: Connect with decentralized finance platforms and other blockchain-based services.
Partnership with Coinbase
In April 2025, PayPal and Coinbase announced a significant expansion of their collaboration to promote the adoption of PYUSD. As part of this partnership:
- Coinbase users can buy, sell, and trade PYUSD with zero platform fees.
- Users can redeem PYUSD 1:1 for U.S. dollars directly on Coinbase.
- Both companies are exploring new use cases in decentralized finance (DeFi), on-chain transactions, and global commerce.
This builds on an earlier integration that allowed Coinbase users to fund accounts via PayPal.
Regulatory Clarity and Developments
In November 2023, the U.S. Securities and Exchange Commission (SEC) issued a subpoena to PayPal regarding PYUSD. However, in February 2025, the SEC formally closed its inquiry without taking enforcement action, confirming the compliance and legitimacy of the stablecoin.
This decision was welcomed by industry leaders and lawmakers as a positive step toward clearer regulations for digital assets in the United States.
Adoption by Financial Institutions
FV Bank, a digital lender, integrated PYUSD in January 2025, allowing account holders to receive PYUSD directly into their USD accounts with real-time conversion. This makes FV Bank one of the few U.S.-regulated banks to offer end-to-end stablecoin payment rails, simplifying inbound and outbound digital asset transactions for customers.
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Frequently Asked Questions
What is PYUSD?
PYUSD is a U.S. dollar-backed stablecoin issued by Paxos and launched by PayPal. It is designed for fast, low-cost digital transactions with the stability of the U.S. dollar.
How is PYUSD different from other stablecoins?
Unlike some stablecoins, PYUSD is backed by secure, liquid assets and offers monthly third-party audited reserve reports. It also benefits from deep integration with PayPal’s extensive payment network and partnerships with major platforms like Coinbase.
Can I use PYUSD outside of PayPal?
Yes. PYUSD is an ERC-20 token, meaning it can be transferred to any compatible Ethereum wallet, used in decentralized applications, or traded on supporting exchanges.
Is PYUSD regulated?
PYUSD is issued by Paxos, a regulated trust company, and complies with relevant state and federal guidelines. The SEC concluded its review of PYUSD in early 2025 without enforcement action.
What are the transaction fees for using PYUSD?
Transferring PYUSD between PayPal accounts is free. External blockchain transactions may incur network (gas) fees. Buying, selling, or converting PYUSD may involve standard platform fees depending on the service used.
How can I redeem PYUSD for U.S. dollars?
You can redeem PYUSD 1:1 for USD directly within your PayPal account or through supported partners like Coinbase.
Conclusion
PayPal USD represents a significant step toward the mainstream adoption of digital currencies. With strong institutional backing, regulatory clarity, and growing ecosystem support, PYUSD is well-positioned to become a widely used tool for everyday payments, remittances, and digital finance. As partnerships expand and new use cases emerge, PYUSD is set to play a key role in the future of money.