PayPal has found itself under the lens of the United States Securities and Exchange Commission (SEC) regarding its U.S. dollar-pegged stablecoin, PYUSD.
Official Disclosure in Q3 Financial Report
PayPal received a subpoena from the SEC’s Enforcement division, specifically related to its PayPal USD stablecoin. This was disclosed officially in the Q3 financial report submitted to the SEC on November 2.
The subpoena, dated November 1, requested PayPal to furnish specific documents. A request to which PayPal responded by stating, “We are cooperating with the SEC regarding this request.”
This development comes approximately three months after PayPal’s bold move into the world of stablecoins with the launch of PYUSD in August. Issued by Paxos Trust, PYUSD is backed by U.S. dollar deposits, short-term Treasurys, and equivalent cash, residing on the Ethereum blockchain with a focus on facilitating digital payments and Web3 applications.
PYUSD’s Successful Rollout
Despite the regulatory scrutiny, PYUSD has experienced a successful rollout. It boasts of a market capitalization of $150 million within two months of its launch. As of the latest data from CoinGecko, the market cap has surged to $159 million. This is with a daily trading volume of almost $2.7 million.
Notably, PYUSD’s rapid adoption is evident in its listing on major exchanges like Coinbase, Crypto.com, Bitstamp, and Kraken shortly after its launch. In a strategic move, PayPal announced in September the integration of PYUSD into the popular Venmo mobile payment service. This further allows users to seamlessly purchase and send PYUSD to friends and family.
Beyond its foray into crypto within the United States, PayPal has been making strides internationally. On October 31, the company secured a UK FCA license, enabling it to offer crypto services in the UK.
U.S. Regulatory Landscape Challenges
The recent SEC action against PayPal adds to the growing evidence that the U.S. regulatory environment is proving challenging for crypto companies. Notably, the SEC has pursued legal action against major players in the industry, including its ongoing lawsuit against Coinbase.
In a notable development, the SEC moved to dismiss its three-year lawsuit against Ripple, in October 2023.
Circle CEO’s Perspective
Reflecting on the regulatory landscape, Circle CEO Jeremy Allaire argued in April 2023 that a cryptocurrency crackdown by U.S. regulators significantly contributed to the declining market capitalization of Circle’s USD Coin stablecoin.
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