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Borderless cryptocurrencies have provided us with an inexpensive, fast, and convenient way to make cross-border payments.
Stablecoins, in particular, have become immensely popular for remittances due to their non-volatile price, high liquidity, US dollar access, and global acceptability.
It was no surprise to see payment online payment company PayPal launch its stablecoin called PayPal USD (PYUSD) in 2023.
Today, customers can use the Paypal stablecoin to make international transfers without having to worry about banking holidays, currency conversion fees, and remittance fees.
In this article, we tell you all about PayPal’s stablecoin PYUSD, and how you can use it.
Key Takeaways
- PayPal’s crypto stablecoin was created in collaboration with blockchain technology company Paxos.
- PYUSD token is also available on PayPal-owned payments app Venmo.
- Users have to pay gas fees when transferring their PYUSD tokens to an external crypto wallet address.
- Regulatory risk is the biggest threat for PYUSD users at the time of writing.
- You can buy PYUSD outside PayPal on crypto exchanges.
What Is PayPal USD Stablecoin?
PayPal USD is a cryptocurrency token pegged to the US dollar. PayPal USD crypto is also known as a stablecoin because it is designed to maintain its value at $1.
PayPal’s crypto stablecoin was created in collaboration with blockchain technology company Paxos.
Note that PayPal does not issue the stablecoin. PYUSD is issued by Paxos on the Ethereum (ETH) and Solana (SOL) blockchain. The collaterals that back PYUSD are held in custody by Paxos. The company publishes an attested report on PYUSD reserves every month.
At the time of writing, PYUSD was the only stablecoin available on PayPal. The token is also available on the PayPal-owned payments app Venmo.
“PayPal USD is designed to reduce friction for in-experience payments in virtual environments, facilitate fast transfers of value to support friends and family, send remittances or conduct international payments, enable direct flows to developers and creators, and foster the continued expansion into digital assets by the largest brands in the world,” said PayPal during the PYUSD launch in August 2023.
How Does PYUSD Work?
PayPal’s PYUSD is a cryptocurrency that exists on the Ethereum and Solana blockchain.
Public blockchains like Ethereum and Solana are home to thousands of crypto assets like PYUSD. These blockchains do not have a centralized operator to manage, secure, and operate the network.
Instead, a decentralized and open set of network participants known as validators ensures that crypto transactions and account balances on Ethereum and Solana are accounted for honestly and transparently.
A key advantage cryptocurrencies like PYUSD have over traditional finance assets is that: cryptocurrencies can be bought, sold, and transfered 24 hours a day. The decentralized network of validators ensures that crypto networks are always online.
How to Use PYUSD on PayPal?
Here is what you can do with PYUSD on PayPal:
- You can use PYUSD to buy listed cryptocurrencies such as Bitcoin (BTC), Ethereum, Litecoin (LTC), and Bitcoin Cash (BCH).
- You can transfer PYUSD to your friends on PayPal without paying fees.
- You can pay at online stores using PYUSD on PayPal.
- Send PYUSD to external crypto wallets.
The PYUSD token can be held in your PayPal wallet or Venmo wallet app. You can also transfer PYUSD stablecoin to supported crypto exchanges and to your self-custodial crypto wallets.
Note that when you initiate an onchain transaction, for example, sending PYUSD from your PayPal account to an external crypto wallet, you will need to pay network fees – also known as gas fees – to complete the transaction.
According to PayPal, users have to pay only gas fees when transferring their PYUSD tokens to an external crypto wallet address.
Risks of PayPal’s PYUSD Stablecoin
Cryptocurrencies come with various risks such as smart contract risk, market volatility, hacks, etc. However, regulatory risk is the biggest threat for PYUSD users, at the time of writing.
Regulators across the world have voiced their concern over the growing popularity of stablecoins and the risk they pose to the stability of the global financial system. Stablecoin regulations, such as The Markets in Crypto-Assets Regulation (MiCA) passed in the European Union (EU), are coming in thick and fast.
In the US, the US Securities and Exchanges Commission (SEC) under chairman Gary Gensler has repeatedly tried to rein in the crypto industry by taking legal actions against several companies including Binance, Coinbase, Kraken, Consensys, and Ripple.
In November 2023, PayPal was also subpoenaed by the SEC regarding its PYUSD stablecoin.
Under the PYUSD terms and conditions, PayPal mentioned that the company can choose to “stop supporting PYUSD at any time.”
“PayPal may but is not obligated to, provide you notice prior to terminating support of PYUSD as a Crypto Asset. You must sell or transfer to an external digital asset wallet any PYUSD token in your Cryptocurrencies Hub that PayPal has communicated it will no longer support,” said PayPal.
On a positive note, some lawmakers like pro-crypto United States Representative Patrick McHenry believe that compliant stablecoins like PYUSD could be the “pillar of our 21st century payments system.”
McHenry said following the launch of PayPal’s PYUSD stablecoin in August 2023:
“This announcement is a clear signal that stablecoins—if issued under a clear regulatory framework—hold promise as a pillar of our 21st century payments system. Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential.”
How to Buy PayPal Stablecoin?
You can buy PayPal’s PYUSD directly on the PayPal app in exchange for fiat or other cryptocurrencies.
Since PYUSD is an on-chain asset on Ethereum and Solana, you can buy PYUSD outside PayPal on centralized crypto exchanges and decentralized crypto exchanges.
If you are buying PYUSD on DEXs, ensure that you have enough tokens to pay for gas fees. Also, check the blockchain network you are buying PYUSD on.
Note that Ethereum-based PYUSD tokens cannot be used on the Solana blockchain and vice versa.
The Bottom Line
When PayPal introduced the PYUSD stablecoin in August 2023, it was seen as a positive event for crypto adoption. It was the first time after Facebook’s (now Meta) abandoned stablecoin project “Libra” that a prominent payment company risked the ire of regulators by rolling out a new stablecoin for its users.
Now, the world awaits clearer crypto regulations so that we can take advantage of the speed and cost efficiencies of using stablecoins for daily payments and cross-border transactions.
FAQs
What is the use of stablecoin in PayPal?
What is the point of PYUSD?
Is PayPal USD crypto a good investment?
References
- Press Release: PayPal Launches U.S. Dollar Stablecoin – Aug 7, 2023 (Newsroom.paypal-corp)
- 20.558 Gwei | Ethereum Gas Tracker | Etherscan
(Etherscan) - pypl-20230930 (Sec)
- PayPal Cryptocurrency Terms and Conditions (Paypal)
- McHenry Statement on PayPal Announcing Launch of Payment Stablecoin | Financial Services Committee
(Financialservices.house)
