What Exactly Is PayPal USD (PYUSD)?

PayPal USD (PYUSD) is classified as a stablecoin, defined as a digital currency whose value is pegged to the U.S. dollar at a 1:1 rate. By establishing the exchange rate and providing the backing of reserves to match the value of the digital currency to the fiat currency, PayPal USD is issued by Paxos Trust Company at a regulated agency and is backed by assets held in U.S. dollar deposits, short-term U.S. Treasuries, and cash equivalents. Aimed for consumption in transactions in the digital world, PayPal describes that the PayPal USD stablecoin will utilize and be transferred via the Ethereum blockchain in a convenient, secure, and inexpensive manner

In addition to the practical utility, PYUSD is also launched and regulated by the New York State Department of Financial Services (NYDFS) to ensure appropriate operation. For attestation for Proof of Reserves operation, independent auditing firms, such as WithumSmith+Brown, PC, provide affirmation regularly that the number of tokens in circulation are equal to the assets in reserve.

Use Case

PayPal USD will run as a stable digital asset that can be used for a variety of settlement transactions across the digital world of finance.

Below are highlighted use cases, some offered through PayPal operation, as all transactions in the form of stable digital asset are considered digital transactions.

• Buying & Selling - pay (or receive - receipt is sale) using intermediary services (e.g., Paypal) that support, on record, the use of stable digital currency e.g., Paypal, Venmo, or respected crypto exchanges, such as Coinbase or Kraken.
• Crypto Conversions - enjoy the stablecoin in days of use across crypto assets, being able to trade for BTC, ETH or LTC on supported exchanges offered by the centralized world (e.g. Paypal) and distributed crypto exchanges (or off chain crypto exchanges).
• Online Purchases and Payments - settle by providing PayPal USD at vendors that support PayPal as a payment Transfer across accounts - free transfer of funds between PayPal Account to other accounts (e.g., PayPal to my outside account). When the time comes to settle, PYUSD stands as a less volatile alternative for requiring funds to be available in a digital format. 

Security and Compliance

The operation of PYUSD follows a framework perhaps more regulated than the prevailing operation of processing electronic transactions. It is required to implement the following:

• Fully backed, regulated reserves - that can be converted instantaneously when requested, to cash (U.S. dollar and receipts).
• State and Federal oversight and regulation - as ensured supervision (independently audited every month).
• Passive asset recovery, again - third-party accounting firm to review, comply, and sign off. All this is established, on-chain, utilizing Smart Contracts for operating on Bitcoin/Ethereum to ensure transaction and account holds.