In August 2023, PayPal launched its stablecoin, PYUSD, becoming the first major fintech company to do so. This stablecoin, backed 1:1 to the U.S. dollar and designed to maintain that value, aims to enhance the experience of PayPal’s over 429 million active users by offering advantages like faster transactions and lower fees. While PYUSD isn’t the first stablecoin, PayPal’s significant brand recognition potentially gives it an edge over competitors. The announcement positively impacted the market, with PayPal’s stock price experiencing a noticeable jump. In this comprehensive guide, we explore the stablecoin’s definition, usage, and, most importantly, how to buy PYUSD. Here’s what you need to know.
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What is PYUSD?
As a regulated and fully dollar-backed stablecoin, PYUSD combines the stability of fiat currency with the speed, efficiency, and programmability of cryptocurrencies. At its core, PYUSD is a stablecoin pegged 1:1 to the US dollar, with its value backed by actual dollar deposits held in bank accounts. This distinguishes it from algorithmic stablecoins that rely on complex mechanisms to maintain their pegs. By being pegged to the U.S. dollar, PYUSD shields users from the extreme volatility typical of cryptocurrencies like bitcoin and ethereum.
Beyond stability, PYUSD introduces three key innovations:
Firstly, it is the first cryptocurrency initiative for a global payment services provider like PayPal, allowing easy integration with PayPal’s vast existing infrastructure. This paves the way for convenient stablecoin usage by consumers and merchants across PayPal’s network.
Secondly, PYUSD fully complies with U.S. regulations, obtaining a conditional BitLicense from the New York State Department of Financial Services. This oversight establishes trust and reliability, which gives PYUSD an edge over unregulated stablecoins.
Finally, as an ERC-20 token on the Ethereum blockchain, PYUSD is programmable using smart contracts. This allows developers to incorporate PYUSD into decentralized finance (DeFi) applications and web3 services. This, in turn, facilitates new functionalities and room for unexplored opportunities.
Regulation is another crucial aspect to consider when assessing whether to buy PYUSD. The PayPal stablecoin is issued and managed by Paxos Trust Company, a regulated blockchain infrastructure firm under the supervision of the New York State Department of Financial Services (NYDFS). This ensures that PayPal USD adheres to strict regulatory standards, fostering trust and transparency among users.
“Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves. Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets. The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA).”
– PYUSD launch announcement by PayPal
How and what can you use PYUSD for?
So, what does PYUSD enable for everyday PayPal consumers like you and me?
Well, it unlocks helpful new features that enhance existing services through the efficiency of blockchain technology. For instance, we can leverage PYUSD for smoother peer-to-peer payments, checkout funding, and crypto-to-fiat conversions, all within PayPal’s apps. And given the 1:1 dollar peg, we sidestep volatility risk.
Here are the PYUSD use cases as of November 2023, in a nutshell:
- Transfer PYUSD: Seamlessly move PYUSD between PayPal and compatible external wallets.
- P2P payments: Send PYUSD directly to friends or family, streamlining the process of digital payments.
- Purchases with PYUSD: Choose PYUSD at checkout to fund acquisitions, integrating stablecoin into everyday transactions.
- Crypto conversions: Convert PayPal’s supported cryptocurrencies to and from PYUSD, offering a smooth transition between digital assets.
As PayPal incorporates PYUSD across its vast merchant network and partners like Venmo, real-world use cases will expand meaningfully. Imagine expats leveraging PYUSD for low-fee remittances or shoppers relying on the stablecoin for simpler digital payments. Through such practical use cases, PYUSD can deliver convenience to millions globally.
Now, peering into the future, PayPal intends for PYUSD to play a key role in the web3 space. As we know, users are expected to have increased control over their data, interactions, and digital identities in web3 environments. By wiring PYUSD into web3 infrastructure, PayPal strategically positions the stablecoin as a critical bridge to merge mainstream finance with blockchain innovations.
The promise is of secure and direct peer-to-peer transactions in web3, thus eliminating traditional (unwarranted) intermediaries such as banks or payment processors. This shift ultimately means a faster, more efficient, and cost-effective mode of transaction. For creators especially, PYUSD offers a path to monetize without intermediary fees, extracting value.
How to buy PYUSD
You can buy the PayPal stablecoin using any reputed crypto platform for PYUSD, such as Coinbase or Kraken. Alternatively, you could also buy it on PayPal itself.
How to buy PYUSD on PayPal
To buy PYUSD on PayPal, follow the same process as purchasing any other supported cryptocurrency on the platform:
Step 1: Add funds to your PayPal account through a connected bank account or card to have dollars available for buying PYUSD.
Step 2: In your PayPal dashboard, go to the “Crypto” section. Here, you will see PYUSD listed alongside options like bitcoin.
Step 3: Choose the PayPal USD (PYUSD) option and enter the dollar amount you want to convert to stablecoin. Pick your attached card to fund this purchase.
Step 4: Review the transaction details closely, checking the purchase amount, fees, and total PYUSD you will receive.
Step 5: Confirm the trade after reviewing to finalize the transaction. The equivalent PYUSD will then be credited to your PayPal digital wallet.
Finding the right platform should not be an issue, considering that many crypto exchanges (both CEX and DEX) have PYUSD listed on their platforms. For the sake of clarity and demonstration in this article, we have chosen to use Coinbase as our primary example. However, note that the purchase process is almost identical across all platforms.
How to buy PYUSD on Coinbase
Step 1: Download the Coinbase Wallet app or browser extension. This self-custody wallet allows you to purchase and hold crypto yourself rather than relying on an exchange custodian like regular Coinbase.
Step 2: When creating your wallet, you’ll get a 12-word recovery phrase. This phrase gives you access to the wallet and crypto held within. Write this phrase down and store it very securely — anyone with this phrase can access your funds.
Step 3: Understand that Ethereum network fees apply for transactions. These fees vary based on activity levels on the network. Expect to budget extra to cover gas fees.
Step 4: Fund your Coinbase Wallet with ethereum (ETH) purchased from regular Coinbase. Follow Coinbase’s guide for transferring this ETH from your Coinbase account to the self-custody wallet.
Step 5: Inside Coinbase Wallet, use the Swap function to exchange your ETH for PYUSD stablecoins. You can swap a desired amount of ETH directly to PYUSD. Leave sufficient ETH to cover the transaction fee.
Step 6: Confirm the details of your PYUSD purchase and approve the transaction in your Wallet. Once successfully completed, your PYUSD balance in Coinbase Wallet will reflect the traded amount.
Is PYUSD the beginning of a new era?
While the launch of PYUSD wasn’t met with instant uptake in the crypto community, the PYUSD stablecoin is notable in both aim and potential, enabling swift peer-to-peer transactions within PayPal’s network. Additionally, it simplifies the exchange between cryptocurrencies and fiat currencies. The stablecoin also allows for direct funding purchases through PayPal’s established payment services. As integration with PayPal’s merchants and partners like Venmo expands, PYUSD’s role in streamlining digital payments is likely to grow. As such, understanding how to buy PYUSD is just the beginning of appreciating its (potentially) transformative role in the world of digital finance.
Frequently asked questions
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