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PayPal Stablecoin Under SEC Scrutiny Following Subpoena

Josh Adams
Last Updated November 2, 2023 10:59 AM
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Key Takeaways
  • PayPal launched its stablecoin PYUSD on August 7.
  • Regulators have taken a keen interest in stablecoins.
  • Now they’ve made it clear they want to talk to PayPal.

The U.S. Securities and Exchange Commission has its eye on PayPal’s new stablecoin. The regulator has served the payment giant a subpoena requesting information about its PYUSD digital token, PayPal, according to a statement on November 2.

Launched on August 7, PYUSD aims to enable faster and cheaper payments on PayPal’s platform. The stablecoin is pegged to the U.S. dollar and backed by cash deposits with Paxos Trust Company.

However, PYUSD’s rapid growth has caught the attention of the SEC’s enforcement division. Regulators likely want to scrutinize whether the stablecoin complies with securities laws. Stablecoins have faced increasing pressure this year to prove they have sufficient dollar reserves.

Paxos and PayPal did not immediately respond to a request for comment.

A Warning for Paypal?

The subpoena comes as a shot across the bow from the SEC to PayPal and other fintech firms eyeing crypto. Regulators are signaling stablecoins must play by the rules, even if they’re run by household names like PayPal. With PYUSD’s future now uncertain, PayPal may have to rein in its Web3 ambitions.

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Dan Schulman, president and CEO of PayPal, in the original statement coinciding with the stablecoin’s launch.

“Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

Earlier this week, PayPal became a licensed crypto firm in the UK, after the Financial Conduct Authority gave it the green light to operate in the country.

This story will be updated as news comes in.

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