The SEC Subpoenas PayPal Over Its Stablecoin PYUSD
The United States Securities and Exchange Commission (SEC) has issued a subpoena to global payment giant, PayPal, regarding its newly launched stablecoin, PYUSD. PayPal announced on November 2 that it had received a subpoena from the SEC’s enforcement arm tied to its U.S. dollar stablecoin, according to a Reuters report.
PayPal made history in August by becoming the first major traditional finance firm to launch a stablecoin. The company aims to offer new use-cases and compete in the highly competitive market. In a statement released as part of its quarterly earnings, PayPal acknowledged the SEC’s subpoena and confirmed its cooperation with the regulatory body. The nature of the subpoena and the documents requested are still unclear, but many speculate that it is a move by the SEC to ensure regulatory compliance in the crypto market.
Regulatory Challenges and Competitors
If the SEC’s subpoena is related to a potential rule breach, PayPal’s stablecoin may face regulatory headwinds. Additionally, the market for stablecoins is highly competitive, with many market participants vying for market share.
Shortly after its launch, PYUSD was listed on major digital asset exchanges like Coinbase and Kraken. Its introduction was seen as a significant development alongside talks of renewed institutional interest in Bitcoin ETFs. However, experts have tempered expectations, citing the present crypto winter and differentiation of stablecoins from other assets in terms of utility.
The Bank of America stated that PYUSD will face fierce competition in the market and is unlikely to become a favorite in the near term. The bank’s analysts emphasized that despite the popular belief, the launch of PayPal’s stablecoin will not lead to proper crypto regulations for the United States market as it does not alter systemic risk for traditional markets.
Projections and Market Performance
On the other hand, Bernstein, a prominent investment firm, projects that the stablecoin market will reach $3 trillion within the next five years. PYUSD is expected to gain a significant market share in this growth. Currently, PYUSD boasts a market capitalization of over $150 million, which Paxos Trust, the issuer, describes as a successful two months. According to CoinGecko data, the stablecoin has an average daily volume of $2.69 million and a valuation of $158 million.
While facing regulatory challenges in the US market, PayPal has obtained a license from the Financial Conduct Authority (FCA) in the UK, demonstrating its commitment to compliance with crypto regulations.
“On November 1, 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin. The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request.”
– PayPal Holdings
