PayPal's crypto evolution: From testing the waters to launching PYUSD stablecoin

A few years ago, firms diving into crypto were tiptoeing through uncertainty. Fast-forward to today, a Bitcoin-focused product strategy within the lineup seems to be a safer bet.

A few years ago, firms diving into crypto were tiptoeing through uncertainty. Fast-forward to today, and a Bitcoin-focused product strategy within the lineup seems like a safer bet.

A few years ago, firms diving into crypto were tiptoeing through uncertainty. Fast-forward to today, and a Bitcoin-focused product strategy within the lineup seems like a safer bet.

Take Block, for example. Its early, all-in stance on Bitcoin now seems like a stroke of genius, given that crypto markets are maturing, Bitcoin is reaching new peaks, and a new administration is seemingly opening the door to crypto and Web3.

PayPal is another payments firm carving out a spot in the crypto landscape — with a more calculated approach. It has been weaving Bitcoin into its fabric over the past five years.

“Several years ago, we began testing cryptocurrency transfers to better understand the technology as it relates to payments and immediately saw the value it could provide,” says May Zabaneh, VP of Product at PayPal.

“Several years ago, we began testing cryptocurrency transfers to better understand the technology as it relates to payments and immediately saw the value it could provide,” says May Zabaneh, VP of Product at PayPal.

“The ability to send a payment over the blockchain in seconds at a fraction of the cost was simply incredible. We needed to explore it further and determine in what capacity we wanted to be involved. That’s when we realized that we wanted to bring this incredibly promising technology to our users.”

In late 2020, PayPal took its first crypto leap, letting users buy, sell, and hold select digital currencies within their accounts. By 2024, its stablecoin PYUSD — initially launched on Ethereum — expanded to Solana for faster, lower-cost transactions. PYUSD is now on both Ethereum and Solana. That same year, PayPal extended crypto trading capabilities to business accounts.

We take a closer look at PayPal’s crypto evolution, its applications, and the trade-offs that come with digital currency transactions.

PayPal’s crypto evolution

PayPal laid the groundwork for its crypto venture by obtaining approvals and engaging with regulators.

The firm received a conditional Bitlicense from the New York State Department of Financial Services (NYDFS) in October 2020 and became one of the first companies to receive a full Bitlicense in June 2022. “PayPal chose to become fully licensed because it was the best way forward to offer cryptocurrency services to its users, given the robust framework provided by the NYDFS for such services,” notes Zabaneh.

With regulatory approval in place, PayPal took decisive steps forward each year, as illustrated in this chart:

The firm also works with over 25 companies to integrate PYUSD more deeply into the crypto ecosystem. These include:

Crypto solutions for consumers & merchants

While PayPal focuses on attracting new users, it’s also encouraging its existing consumers and merchants to integrate crypto into their transactions to drive wider adoption.

For Consumers: PayPal is strengthening its relationship with consumers by offering crypto options and enabling them to put their digital assets to use. Zabaneh explains that consumers can buy, send, or spend crypto through various channels, including:

Zabaneh believes payment choice is key. “As with almost anything with payments, consumers and shoppers should be given the choice in how they want to pay,” she says.

Zabaneh believes payment choice is key. “As with almost anything with payments, consumers and shoppers should be given the choice in how they want to pay,” she says.

For Merchants: Last year, PayPal expanded crypto access to business account users, letting them buy, hold, and sell digital assets. For merchants already integrated with PayPal Checkout, this means providing more payment options for consumers — without requiring any additional integration or operational changes.

For Merchants: Last year, PayPal expanded crypto access to business account users, letting them buy, hold, and sell digital assets. For merchants already integrated with PayPal Checkout, this means providing more payment options for consumers — without requiring any additional integration or operational changes.

“This provides business owners with the ability to explore and understand cryptocurrency from a trusted brand so they can begin to get comfortable with it as a payment method,” says Zabaneh.

Here’s what happens during a commerce transaction: If a shopper has $60 in their cart and enough BTC or ETH, they can use their crypto just like a balance or credit card. Once the transaction is confirmed, PayPal converts the crypto to fiat and sends it to the merchant. This means merchants never have to handle crypto directly when getting paid.

This method can help businesses receive payments faster, improve cash flow management, and avoid international currency fees.

“We plan to continue to deliver more use cases for merchants and consumers around the world,” says Zabaneh.

The double-edged sword of crypto payments and how PayPal is working through it

While progress with crypto payments continues, certain grey areas still require clearer guidelines, and PayPal is working to address them. Among them are:

i) Chargeback protections: Traditional credit card transactions come with chargeback rights and fraud protection. Crypto transactions might not have the same level of dispute resolution.

However, Zabaneh sees PYUSD differently, as it is backed by cash and Treasuries and is issued and managed by Paxos Trust Company, a centralized entity regulated by the NYDFS.

“Within PayPal’s crypto integration, buyer and seller protections remain in place, much like traditional transactions,” Zabaneh says.

She further explains that PayPal maintains the same security and protections that merchants are accustomed to. Additionally, PayPal converting crypto to fiat before settling with merchants also helps reduce the risk of irreversible transactions.

“We are actively working to deepen the integration between cryptocurrency and our payments platform to enable a