PayPal USD (PYUSD): Who Issues It, How It Works, Rewards and Redemption

PYUSD is issued and redeemed by Paxos, and the reserves sit with Paxos ¹³. PayPal's role is distribution: it lets its users buy, hold, send, spend and earn rewards on PYUSD ⁴.

Paxos began in 2012 as the itBit exchange. It received a New York limited-purpose trust charter in 2015 ⁶. According to its current PYUSD terms, it now issues the token as Paxos Trust Company, N.A., under approval from the Office of the Comptroller of the Currency (OCC) ³. The OCC granted conditional approval for the federal charter in December 2025 ⁶. PayPal's own FAQ still refers to the issuer as "Paxos Trust Company, LLC," the older New York name ⁴.

What this means for you:

• Any claim to redeem tokens for dollars directly is against Paxos, not PayPal.
• Paxos sets the rules on freezing and redemption.

The same split appears with other dollar stablecoins, such as Circle's USDC and Tether's USDT. Each issuer sets its own reserve and redemption terms. See types of stablecoins.

Paxos states that PYUSD reserves are held entirely in US dollar deposits, US Treasuries and similar cash equivalents. It says they are kept in segregated, bankruptcy-remote accounts ¹. Each month it publishes two documents ²:

1. A self-reported breakdown of the reserve portfolio, released about five business days after month-end.
2. An attestation report from an independent accounting firm. KPMG LLP has done these since February 28, 2025. WithumSmith+Brown did them before that.

An attestation checks reserve balances at a point in time. It is not a full financial audit of Paxos.

PYUSD tokens are not FDIC insured. Registered Paxos customers can opt in to pass-through FDIC coverage on the dollar reserves, subject to conditions. That coverage does not protect against Paxos's own insolvency ³.

There are two ways to turn PYUSD into dollars.

1. Inside PayPal (or Venmo), for most individuals

• Set up: verify your identity, opt in to crypto, then buy PYUSD at 1:1 with your USD balance ⁴.
• Fees: PayPal charges no fee to buy, sell, hold or transfer PYUSD for eligible users. Converting to currencies other than USD includes an exchange-rate spread ⁴.
• Selling: you sell PYUSD back to USD at 1:1 in the app.
• Availability: PayPal says PYUSD is coming to "about 70 markets." Check the app to see whether it is available in your country ⁴.

2. Directly with Paxos, for verified Paxos customers ³

• Account: you need a fully verified Paxos account. Each account has its own redemption address.
• Rate and fee: redemption is always 1:1 regardless of reserve value, and Paxos charges no redemption fee.
• Minimum and bank fees: Paxos may set a minimum equal to its bank's wire fee and pass on bank charges.
• Timing: bank withdrawals can take up to two days, longer for large amounts.
• Dormancy fee: Paxos charges $2 a month on a balance that has been dormant for 12 months.

If you hold PYUSD in a self-custody wallet or on an exchange, you have neither route directly. You sell it on the market or send it back to PayPal or Paxos. The market price usually stays close to $1 but can move briefly; see stablecoin depeg.

PayPal pays a variable reward on PYUSD held in the PayPal app. The rate was 4% a year as of October 23, 2026 ⁴. How it works:

• You must opt in and hold at least 1 PYUSD.
• Rewards are calculated on your average daily balance and paid monthly in PYUSD.
• You can opt out at any time. Rewards already earned are still paid on the next payout date.

These rewards are a PayPal program. Paxos's terms state that the token itself pays no interest ³⁴. The rate can change.

PYUSD launched on Ethereum in August 2023 and added Solana in 2024 ⁶. Paxos's page also lists Stellar, Arbitrum, X Layer, Polygon and Stable ¹. DefiLlama tracks PYUSD supply on 19 chains, including Avalanche, Tron, Sei, Cardano and OP Mainnet ⁵. Some of these are bridged versions rather than tokens Paxos mints natively.

Before sending PYUSD out of PayPal:

• Choose the network your destination wallet or exchange actually supports.
• Verify the token contract.

A transfer on the wrong network, or of a look-alike token, may be unrecoverable.

• Issuer freeze powers. Paxos can freeze or upgrade PYUSD tokens wherever they are held, including in self-custody wallets. A freeze can be temporary or permanent. Paxos can act on a legal directive, a partner's notice or its own discretion, and holders get no compensation. Tokens linked to illicit activity can be refused redemption and forfeited ³.
• Operational error. In October 2025, Paxos minted 300 trillion PYUSD by mistake (see below). The error was reversed in about 30 minutes, but some DeFi venues paused PYUSD markets ⁸.
• Custody choice. Inside PayPal, PayPal controls access to your account. In an external wallet you hold the keys but bear the security risk; see self-custody.
• Market price vs redemption. Only Paxos customers have a direct 1:1 claim ³. Everyone else depends on PayPal's buy and sell service or on market liquidity.