PayPal has revealed that it received a subpoena concerning its PYUSD, a digital currency pegged to the US dollar, from the US Securities and Exchange Commission (SEC). The latest development is a significant turn of events in the continuous interaction between digital assets and traditional finance.
PayPal And Cryptocurrency
The popular fintech behemoth has made the headlines following its recent move to accept digital currencies for transfers and payments. The initial details of this historic decision were made public in August.
The launch of PayPal USD (PYUSD) marked another milestone in the company’s foray into the virtual currency terrain. Stablecoins are a unique set of digital currencies backed by deposits of USD, US Treasuries, special government IOUs, and other similar forms of fiat monies.
In addition, stablecoins like PYUSD are linked to dependable assets like US dollars; they provide a reliable and safe method to utilize digital money. This lessens the risks frequently associated with the massive price fluctuations of cryptocurrencies.
With this move, PayPal is leading its peers in enabling broader adoption of cryptocurrencies globally. This development provides insights for other businesses to adopt a similar strategy and include virtual currencies in their offerings.
Regulatory Hurdles For PayPal
Even though PayPal has significantly improved its crypto business, it hasn’t yet actualized most of its plans for the fast-evolving industry. PayPal’s crypto operations are limited after the UK Financial Conduct Authority (FCA) approved the fintech firm to offer crypto services in the country.
Accordingly, the digital payment behemoth could onboard new customers who can purchase additional crypto assets, increase the scope of its existing crypto-related offerings, and automate exchanging crypto assets for cash.
Earlier this week, the UK Treasury proposed including crypto activities in its new financial services regulation. However, the proposal became public knowledge a little before PayPal’s SEC subpoena,
The proposal states that to conduct business in the United Kingdom, any entity engaged in crypto-related activities must obtain permission from the financial regulator. The push for regulation, regardless of jurisdiction, highlights the complex regulatory obstacles that businesses such as PayPal face in this rapidly evolving industry.
PayPal’s PYUSD And The SEC’s Impasse
According to an official statement after the launch, PayPal’s launch of the PYUSD, an ERC-20 token based on the Ethereum blockchain, was to help consumers, merchants, and developers understand the differences between traditional and digital currencies.
But as the recent SEC subpoena shows, reaching this objective entails substantial regulatory requirements. One of such requirements was the need for the payment solution to maintain transparency.
Consequently, the firm in charge of overseeing the issuance of PayPal USD, Paxos Trust Company, promised to start making available a monthly Reserve Report for PayPal USD to the public in September 2023. Besides this report, the firm also committed to having an independent audit of the stablecoin’s reserve assets.
However, the SEC’s recent subpoena to PayPal regarding its stablecoin PYUSD illustrates the complex interplay between innovative financial technology and the commission’s enforcement approach to regulation.