PayPal USD (PYUSD) is a US dollar-pegged stablecoin issued by Paxos Trust Company under New York's trust charter, launched in August 2023 as PayPal's entry into the stablecoin market. It's backed 1:1 by a reserve of US dollar deposits, short-dated US Treasuries and similar cash equivalents, with Paxos publishing monthly attestations from an independent accounting firm.
What it does
PYUSD is designed to move between PayPal's roughly 400 million user accounts, Venmo and external wallets without the friction of a bank transfer, and to settle on-chain for merchants and developers who want programmable dollars. It launched on Ethereum and expanded to Solana in 2024 to take advantage of that chain's lower fees and faster settlement, positioning PYUSD for payments and remittance use cases rather than pure DeFi speculation.
Holders can convert between PYUSD and US dollars inside the PayPal and Venmo apps at no cost, which is the token's real differentiator: distribution through an app most Americans already have installed, rather than relying on crypto-native exchanges. PayPal has also integrated PYUSD into merchant checkout tools and cross-border transfer products, and pays a rewards rate to eligible US PayPal balance holders on PYUSD held in-app.
Risks
PYUSD's reserve and issuance sit with Paxos, meaning holders are trusting a regulated but centralised custodian and are exposed to counterparty and freezing risk — Paxos, like other issuers, can and does blacklist addresses. PayPal itself is a listed, heavily regulated company, which cuts both ways: it makes abrupt insolvency unlikely but also puts PYUSD squarely under US regulatory scrutiny, including scrutiny of its yield rewards programme under the 2025 GENIUS Act's stablecoin framework, which bars issuers from paying interest directly and has forced questions about whether PayPal's structure, routed as a PayPal rather than Paxos reward, complies.
Market share is another constraint: PYUSD's supply remains a small fraction of Tether's or Circle's USDC, and its growth has been closely tied to PayPal's own promotional pushes and rewards incentives rather than organic DeFi integration, so its liquidity outside PayPal's own rails is comparatively thin.