PayPal Receives SEC Subpoena Regarding PYUSD Stablecoin

PayPal Holdings, a global payments firm expanding into the crypto space, received a subpoena from the United States Securities and Exchange Commission (SEC) regarding its US dollar stablecoin PayPal USD (PYUSD), the company disclosed on Nov. 2 in its Q3 financial report with the SEC.

PayPal noted:

“On November 1, 2023, we received a subpoena from the US SEC Division of Enforcement relating to PayPal USD stablecoin. We are cooperating with the SEC in connection with this request.”

The nature of the subpoena and the specific documents requested remain unclear. However, many crypto users have drawn conclusions from the SEC’s tough stance on the market in recent months, and others are seeing it as a move to ensure regulatory compliance.

This action by the SEC comes about three months after PayPal launched its PYUSD stablecoin in early August. The stablecoin is backed by US dollar deposits, short-term Treasuries, and other cash equivalents that help ensure its stability. Paxos Trust issues it on the Ethereum blockchain as an ERC-20 token designed to be compatible with crypto wallets and web3 apps. Moreover, on Sept. 11, PayPal added a feature that enables users to convert digital currencies into US fiat.

PayPal Deepens Crypto Reach

As per a Paxos spokesperson, PayPal USD has seen a successful start, hitting a $150 million market value in just two months. Currently, it has a market capitalization of about $159 million and a daily trading volume of nearly $2.7 million, according to CoinGecko.

PayPal USD adoption grew rapidly when major exchanges such as Crypto.com, Bitstamp, Coinbase, and Kraken added the stablecoin to their platforms shortly after its launch. The company has been expanding its crypto efforts not only in the United States but also in other countries. On Oct. 31, PayPal UK Limited secured a license from the United Kingdom Financial Conduct Authority (FCA) to offer crypto services in the country.

The SEC’s recent action against PayPal demonstrates the challenging regulatory environment for crypto companies in the US. The regulator has sued several major companies in the crypto, such as Binance and Coinbase.

In its lawsuit against Binance, the SEC accused Binance’s BUSD, another stablecoin issued by Paxos, of being an unregistered security. In February, the SEC sent a Wells Notice to Paxos, indicating possible enforcement action against the firm. However, Paxos disagreed with the SEC, stating that BUSD does not qualify as a security under federal securities laws. Notably, Paxos halted the issuance of new BUSD tokens in February at the direction of the NYDFS.