PayPal USD: what PYUSD is and how it works
PYUSD is a Paxos-issued stablecoin pegged to the dollar. It is not FDIC-insured or a bank deposit, and PayPal users can buy, send and redeem it.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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- Paxos holds cash and US Treasuries behind the token.
- FDIC insurance does not cover PYUSD.
- Ethereum came first, and Solana arrived in 2024.
- A stablecoin is not a bank balance.
PayPal has said it wants PYUSD to show how stablecoins can work for everyday payments. The token is a private product, not a government-issued digital dollar.
What is PayPal USD?
PayPal USD is a stablecoin denominated in US dollars. Paxos Trust Company issues it for PayPal and holds its reserves. Paxos says it is redeemable 1:1 for US dollars, and it began issuing the token for PayPal in August 2023.
How does PYUSD keep its peg?
The peg rests on the reserves Paxos holds. Those reserves include cash, US Treasuries and similar liquid assets. The token is not backed by the full faith and credit of the US government.
How do people use PYUSD?
You can buy, hold, send and redeem PYUSD through PayPal and compatible crypto wallets. A transfer moves the token between wallet addresses on the network the sender picks.
- Confirm your wallet supports PYUSD before you send it.
- Check that the sender and receiver use the same blockchain network.
- PYUSD began on Ethereum, and Paxos added Solana in 2024.
- A transfer on the wrong network can make the funds unrecoverable.
What risks and limits apply?
PYUSD is not FDIC-insured, so it lacks bank-deposit protection if a bank fails. It is not a bank balance. Stablecoins also differ in who issues them, how redemption works and where they are accepted.
Frequently asked questions
No. FDIC insurance covers bank deposits, not a stablecoin.
Yes. Paxos redeems it for dollars, and you start the process in PayPal.
Paxos launched it on Ethereum and added Solana in 2024. Check your wallet's current list before sending.
The IRS treats crypto as property. PYUSD received as pay is usually income that day, and spending it can create a gain or loss.
