PayPal, a financial technology behemoth, made headlines in August when it became the first major fintech company to embrace digital currencies for payments and transfers by launching its U.S. dollar-pegged stablecoin. However, recent developments have cast a shadow on this ambitious foray into the world of cryptocurrency.
On November 2nd, it was revealed that PayPal had received a subpoena from the United States Securities and Exchange Commission (SEC) pertaining to its PayPal USD stablecoin. This disclosure was officially made in PayPal’s Q3 financial report submitted to the SEC. The subpoena, issued by the SEC’s Enforcement division on November 1, specifically requested certain documents from PayPal, marking a significant step in the regulatory scrutiny of stablecoins.
PayPal, in response to the SEC’s subpoena, conveyed its commitment to cooperation with the regulatory authority. While the exact nature and scope of the investigation were not disclosed, it underscores the growing regulatory attention on the burgeoning stablecoin industry and its potential implications for the broader cryptocurrency landscape.
The backdrop to this development is PayPal’s introduction of the PYUSD stablecoin in early August. This stablecoin is issued by Paxos Trust and is backed by a reserve of U.S. dollar deposits, short-term Treasurys, and similar cash equivalents. Operating on the Ethereum blockchain, PYUSD is primarily designed to facilitate digital payments and support the growing realm of Web3 applications.
PYUSD’s journey in the cryptocurrency market has been marked by considerable success. According to a spokesperson for Paxos, the stablecoin quickly gained traction, achieving a market capitalization of $150 million within just two months of its launch. As of the latest available data, PYUSD’s market cap now hovers around $159 million, with a daily trading volume of approximately $2.7 million, as reported by Coinmarketcap.
![PayPal Stablecoin Under Investigation by SEC image 10](https://i0.wp.com/nosisnews.com/wp-content/uploads/2023/11/image-10.png?resize=1023%2C568&ssl=1)
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One pivotal factor contributing to PYUSD’s rapid adoption was its listing on major cryptocurrency exchanges. Prominent platforms like Coinbase, Crypto.com, Bitstamp, and Kraken wasted no time in integrating the stablecoin into their offerings, further bolstering its presence in the market. In a bid to expand its utility and reach, PayPal announced plans to integrate the PYUSD stablecoin into its Venmo mobile payment service. This strategic move aims to allow users to seamlessly purchase PYUSD and facilitate peer-to-peer transfers among friends and family.
PayPal’s crypto endeavors are not limited to the United States alone. In a global expansion effort, the company recently secured a license from the United Kingdom Financial Conduct Authority, enabling it to provide cryptocurrency services in the United Kingdom. This international expansion underscores the company’s commitment to embracing the transformative potential of cryptocurrencies on a global scale.
However, the SEC’s subpoena to PayPal serves as a reminder of the regulatory complexities facing cryptocurrency companies in the United States. The SEC has initiated legal actions against several prominent firms in the crypto industry, including an ongoing lawsuit against Coinbase, one of the leading cryptocurrency exchanges. In a notable development, the SEC moved to dismiss its three-year lawsuit against Ripple, the company behind XRP, one of the largest cryptocurrencies by market capitalization, in October 2023.
This regulatory backdrop has raised concerns and uncertainties within the cryptocurrency industry, as companies grapple with evolving compliance requirements and navigate the intricate regulatory landscape. For instance, Circle CEO Jeremy Allaire pointed to U.S. regulatory pressure as a significant factor contributing to the declining market capitalization of Circle’s USD Coin stablecoin in April 2023.
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