PayPal hit with SEC subpoena over its PYUSD stablecoin

Payments giant PayPal is currently under regulatory scrutiny by the United States Securities and Exchange Commission in connection with its PYUSD stablecoin.

"On November 1, 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin," the company disclosed in a Form 10-Q filed with the SEC on Wednesday. "The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request."

SEC subpoenas are primarily a means of collecting information and do not necessarily lead to legal actions or enforcement. The SEC determines its course of action based on the information it gathers.

PayPal launched its PYUSD stablecoin in August through a partnership with the crypto firm Paxos, saying that the stablecoin is regulated and fully backed. PYUSD is issued by Paxos, which is subject to regulatory oversight by the New York State Department of Financial Services (NYDFS), and PayPal has a BitLicense from NYDFS, PayPal said at the time.

While initially, there was excitement surrounding the launch of PYUSD, its adoption appears to be sluggish. The current total supply of PYUSD stands at around 159 million tokens. It remains to be seen whether the SEC, which is perceived to be hostile toward the crypto industry, will take any action against PYUSD.

The SEC has previously accused Binance's BUSD, another stablecoin issued by Paxos, of being an unregistered security in its lawsuit against Binance in June. In February, the SEC issued a Wells Notice to Paxos, indicating a potential enforcement action based on the allegation that BUSD constitutes an unregistered security. However, Paxos disputed the SEC staff's position, saying that BUSD does not qualify as a security under federal securities laws and said it is "prepared to vigorously litigate if necessary."

Notably, Paxos halted the creation of new BUSD tokens at the direction of the NYDFS in February.