PayPal Receives SEC Subpoena for Documentation on PYUSD
In its quarterly earnings report, PayPal disclosed that it had received a subpoena from the Securities and Exchange Commission (SEC) regarding its stablecoin, PayPal USD (PYUSD). The SEC’s Division of Enforcement is seeking documentation related to PYUSD. While PayPal is cooperating with the SEC, no further details were provided.
Additionally, PayPal revealed that it had received a civil investigative demand (CID) from the Consumer Financial Protection Bureau (CFPB) in October. The CID is related to investigation and error-resolution obligations under Regulation E. PayPal stated that it is fully cooperating with the CFPB and complying with their request for relevant documentation.
PayPal’s Foray into Cryptocurrencies
PayPal has a history of involvement with digital assets, having allowed users to buy and sell cryptocurrencies since 2020. In August 2023, PayPal became the first major financial firm to launch its own stablecoin called PayPal USD. This USD-pegged stablecoin operates on the Ethereum blockchain and is issued by Paxos. It is backed by short-term Treasuries, USD deposits, and similar assets.
Although PYUSD gained popularity quickly after its launch, it faced criticism due to concerns about developers’ ability to freeze and wipe out users’ accounts. However, some industry voices, like David “JoelKatz” Schwartz of Ripple, defended this practice as necessary for redeeming the stablecoin for dollars.
SEC Continues Pressure on the Cryptocurrency Industry
The SEC’s subpoena to PayPal aligns with its ongoing scrutiny of stablecoins and the broader cryptocurrency industry. The Commission has expressed concerns about stablecoins undermining central bank authority and causing financial turmoil if they were to crash.
Despite facing some setbacks in recent cases involving Grayscale and Ripple, the SEC has continued to take actions against various actors in the cryptocurrency industry. Its latest major actions include lawsuits against SafeMoon and its executives.
Hot Take: SEC’s Ongoing Efforts to Regulate Stablecoins
The SEC’s subpoena to PayPal is part of its ongoing efforts to regulate stablecoins and maintain oversight of the cryptocurrency industry. The Commission’s concerns about stablecoins undermining central banks and posing financial risks reflect the need for regulatory clarity and investor protection in this rapidly evolving space.
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