Just three months after PayPal entered the fray to bring stablecoins to the masses, it’s drawing attention from US regulators who are tightening the screws on the stablecoin sector.
The payments giant said on Thursday it had received a subpoena from the Securities and Exchange Commission regarding its stablecoin pegged to the US dollar. according to Reuters. TechCrunch has reached out to PayPal for comment.
In early August, PayPal launched PalPal USD, or PYUSD, a stablecoin issued by Paxos Trust Company and backed by US dollar deposits. At the time, the company said the digital currency solution would be “gradually” rolled out to users in the U.S. In September, PayPal made the stablecoin available on Venmo.
In the PayPal app, users can buy and sell PYUSD, convert it to other cryptocurrencies like Bitcoin, pay for items at “millions” of online stores, send stablecoins to PayPal friends in the US for free, or transfer the tokens in external Ethereum Wallets.
PayPal joins a growing list of tech companies targeted by US authorities for their interactions with digital currencies. While most of the players under regulatory scrutiny are crypto-native, PayPal marked the first major US financial institution to launch stablecoins for payments and transfers.
PayPal’s regulatory scrutiny will likely cause more concern in the US stablecoin space, which has already been dampened by the challenges facing Circle. The payments-focused crypto firm, which is the backer of the popular USDC-based stablecoin, has failed to go public due to questions raised by the SEC, according to The Wall Street Journal.
It is widely known that the chairman of the SEC is Gary Gensler not a fan of stablecoins, warning of the crypto asset’s systemic risk to financial stability. Jeremy Allaire, CEO of Circle, he argued that the securities authority is not the right regulator for stablecoins due to the asset’s focus on payments.
Meanwhile, on other continents, entrepreneurs and regulations are promoting the development of stablecoins, which are seen as the most useful form of cryptocurrency for exchanging value than most volatile tokens. Hong Kong, for example, is working to launch a regulatory framework for stablecoins by 2024. The European Union has also created guardrails for stablecoin use, with companies such as Monerium offering regulated euro tokens.
