PayPal USD Stablecoin Gets EU Green Light

What Is PayPal USD (PYUSD)?

PayPal USD (PYUSD) is a U.S. dollar-backed stablecoin introduced by PayPal in August 2023. Developed in partnership with Paxos, a regulated trust company overseen by the New York Department of Financial Services (NYDFS), PYUSD is designed to provide a stable digital currency for payments and transfers.

Backing and Stability

PYUSD is fully backed by U.S. dollar deposits, U.S. Treasuries, and similar cash equivalents, ensuring a 1:1 peg to the U.S. dollar. This backing is intended to maintain the stablecoin’s value and provide users with confidence in its stability.

Blockchain Integration

Initially launched on the Ethereum blockchain, PYUSD has expanded its presence by integrating with the Solana network. This integration aims to leverage Solana’s high throughput and low transaction costs to enhance the usability of PYUSD in various applications, including decentralized finance (DeFi) and cross-border payments.

Use Cases

PYUSD facilitates peer-to-peer transfers, merchant payments, and serves as a bridge between traditional finance and the crypto ecosystem. Its integration with platforms like Coinbase and PayPal’s vast merchant network aims to increase the adoption and utility of PYUSD, making it a viable option for everyday transactions.

As of June 2025, PYUSD has surpassed a market capitalization of $1 billion, reflecting its growing acceptance and usage within the cryptocurrency market. This growth is attributed to its regulatory compliance and the strategic partnerships that have expanded its reach and functionality.

In summary, PYUSD represents a significant development in the stablecoin space, offering a regulated and stable digital currency backed by U.S. assets. Its integration with multiple blockchains and partnerships with major platforms position it as a key player in the evolving landscape of digital payments and finance.

EU Regulatory Landscape for Stablecoins

The European Union’s regulatory framework for stablecoins is primarily governed by the Markets in Crypto-Assets Regulation (MiCA), which aims to standardize the regulation of crypto-assets across the EU to ensure financial stability, protect investors, and foster innovation.

Key Provisions of MiCA Relevant to Stablecoins

1. Classification of Stablecoins

Under MiCA, stablecoins are categorized into two main types:

• Asset-Referenced Tokens (ARTs): Stablecoins that are pegged to a basket of assets, such as a mix of fiat currencies or commodities.
• E-Money Tokens (EMTs): Stablecoins that are pegged 1:1 to a single fiat currency, typically the euro or U.S. dollar.

PayPal USD (PYUSD) falls under the category of EMTs, as it is pegged 1:1 to the U.S. dollar.

2. Reserve Requirements

MiCA mandates that stablecoin issuers maintain a certain level of reserves to ensure the stability and redeemability of their tokens:

• For significant stablecoins (those with reserves exceeding €5 billion or more than 10 million users), issuers are required to hold at least 60% of their reserve assets in EU-based banks. This provision aims to enhance the stability of the euro area financial system by ensuring that a substantial portion of the reserves is within the EU jurisdiction.
• For smaller stablecoins, the requirement is 30% of reserves to be held in EU banks. This tiered approach reflects the proportional risk and impact of different stablecoins on the financial system.

3. Authorization and Supervision

Issuers of ARTs and EMTs must obtain authorization from a national competent authority (NCA) within the EU. This process involves:

• Submitting a detailed whitepaper outlining the stablecoin’s structure, governance, and risk management strategies.
• Demonstrating compliance with capital requirements and governance standards.
• Undergoing regular audits and stress tests to assess the resilience of the stablecoin.

Once authorized, issuers are subject to ongoing supervision by the NCA and must adhere to reporting and transparency obligations.

4. Redemption Rights and Consumer Protection

MiCA emphasizes the protection of consumers by ensuring that holders of EMTs have the right to redeem their tokens at par value. Issuers must provide clear and accessible mechanisms for redemption and must disclose any fees or conditions associated with the process. This transparency is intended to build trust and confidence among users.

5. Delisting and Compliance

To comply with MiCA, exchanges and platforms operating within the EU are required to delist stablecoins that do not meet the regulatory standards. This has led to the suspension of several stablecoins, including PYUSD, on major European exchanges such as Crypto.com and Bitstamp. These actions underscore the EU’s commitment to enforcing MiCA and maintaining a secure and compliant crypto market.

Implications for PYUSD

For PayPal USD (PYUSD) to operate within the EU under MiCA, it must:

• Establish reserve accounts in EU-based banks to meet the 60% reserve requirement.
• Obtain authorization from an EU national competent authority.
• Adhere to MiCA’s governance, reporting, and transparency standards.

As of now, PYUSD has not secured the necessary authorization under MiCA, leading to its delisting from major European exchanges. Without compliance with MiCA’s provisions, PYUSD faces significant challenges in establishing a foothold in the European market.

In summary, while MiCA provides a clear and structured regulatory framework for stablecoins within the EU, it also imposes stringent requirements that PYUSD has yet to fulfill. The path forward for PYUSD in Europe hinges on its ability to navigate these regulatory challenges and achieve compliance with MiCA’s provisions.

Current Status of PYUSD in the EU

As of June 2025, PayPal USD (PYUSD) faces significant regulatory challenges in the European Union, primarily due to the stringent requirements set forth by the Markets in Crypto-Assets Regulation (MiCA). The MiCA framework mandates that stablecoin issuers hold at least 60% of their reserve assets in EU-based banks to ensure compliance. This provision poses a substantial hurdle for PYUSD, as its reserves are currently held in U.S.-based financial institutions, making it non-compliant with MiCA’s reserve requirements.

Consequently, major cryptocurrency exchanges operating within the EU have been compelled to delist PYUSD to adhere to MiCA regulations. For instance, Crypto.com announced that, effective January 31, 2025, it would suspend purchases of PYUSD and other non-compliant tokens, including Tether’s USDT and Wrapped Bitcoin (WBTC). While deposits were disabled shortly thereafter, users were given until March 31, 2025, to withdraw or convert their holdings to MiCA-compliant assets. Post this deadline, any remaining PYUSD balances were automatically converted to a MiCA-approved stablecoin or another asset of equivalent market value.

Similarly, Bitstamp, another prominent exchange, ceased offering PYUSD for trading in its pro and basic modes within the EU, aligning with the regulatory requirements of MiCA.

These actions underscore the EU’s commitment to enforcing MiCA’s provisions and highlight the challenges faced by non-EU-based stablecoin issuers like PayPal in navigating the regulatory landscape.

In response to these challenges, PayPal has initiated plans to expand PYUSD’s availability to the Stellar network, pending regulatory approval from the New York State Department of Financial Services. The integration with Stellar aims to enhance PYUSD’s utility for real-world payments, commerce, and micro-financing by leveraging Stellar’s fast, low-cost blockchain infrastructure. This expansion could potentially provide users with improved access to financial services, including cross-border payments and working capital solutions.

However, it’s important to note that this expansion pertains to the U.S. market and does not directly address the regulatory hurdles PYUSD faces within the EU. Without obtaining the necessary authorization under MiCA, PYUSD’s operations within the EU remain limited.

In summary, while PYUSD continues to operate and expand in certain markets, its presence in the European Union is currently restricted due to non-compliance with MiCA’s regulatory requirements. The path forward for PYUSD in Europe hinges on its ability to navigate these regulatory challenges and secure the necessary authorizations.

Implications for Crypto Investors and Traders in Europe

The regulatory landscape for stablecoins in the European Union has undergone significant changes with the implementation of the Markets in Crypto-Assets Regulation (MiCA). For cryptocurrency investors and traders in Europe, particularly those interested in PayPal USD (PYUSD), these developments have profound implications.

1. Limited Access to PYUSD on Major Exchanges

As of January 31, 2025, major cryptocurrency exchanges operating within the European Union, including Crypto.com and Bitstamp, have delisted PYUSD to comply with MiCA regulations. This action has effectively restricted European users’ ability to purchase or trade PYUSD on these platforms. While custody of PYUSD may still be permitted, the absence of trading options limits its liquidity and usability for European investors.

2. Challenges in Compliance with MiCA

MiCA requires stablecoin issuers to hold at least 60% of their reserve assets in EU-based banks. As PYUSD is issued by Paxos, a U.S.-based entity, and its reserves are held in U.S. financial institutions, it does not meet this requirement. This non-compliance has been a significant factor in its delisting from European exchanges, highlighting the challenges non-EU-based stablecoins face in entering the European market.

3. Potential Alternatives and Market Shifts

The delisting of PYUSD has led European investors to consider alternative stablecoins that comply with MiCA regulations. Stablecoins such as USD Coin (USDC) and Euro Coin (EURC) are gaining traction due to their compliance with EU regulations. This shift reflects a broader trend towards regulatory-compliant digital assets within the European market.

4. Impact on Cross-Border Transactions and Payments

PYUSD’s limited availability in Europe may affect its utility for cross-border transactions and payments. Investors and traders who relied on PYUSD for such purposes may need to explore other stablecoins or digital currencies that are more accessible within the EU. This transition could involve additional steps and considerations, such as currency conversion and platform compatibility.

5. Future Prospects and Regulatory Developments

PayPal’s plans to expand PYUSD onto the Stellar network, pending approval from the New York State Department of Financial Services, indicate a potential avenue for broader adoption. However, this expansion pertains to the U.S. market and does not directly address the regulatory challenges PYUSD faces within the EU. The future of PYUSD in Europe hinges on its ability to navigate MiCA’s regulatory requirements and secure the necessary authorizations.

Final Takeaway

The European Union’s implementation of the Markets in Crypto-Assets Regulation (MiCA) has significantly impacted the landscape for stablecoins, particularly PayPal USD (PYUSD). As of June 2025, PYUSD remains unavailable for trading on major European exchanges such as Crypto.com and Bitstamp due to non-compliance with MiCA’s stringent requirements. These regulations mandate that stablecoin issuers hold a substantial portion of their reserves in EU-based institutions and obtain necessary authorizations, conditions that PYUSD has yet to fulfill.

While PayPal has announced plans to integrate PYUSD with the Stellar network, pending regulatory approval from the New York State Department of Financial Services, this development pertains to the U.S. market and does not address the regulatory challenges within the EU.

For cryptocurrency investors and traders in Europe, the current regulatory environment necessitates a cautious approach. Engaging with PYUSD within the EU is not feasible at this time, and users are advised to consider alternative stablecoins that comply with MiCA regulations. Staying informed about regulatory developments and ensuring compliance with local laws is crucial for navigating the evolving digital asset landscape in Europe.