Scoop: PayPal Escape SEC Probe, Faces Bipartisan Stablecoin Regulation
Investigation Regarding PayPal's Digital Coin, PYUSD, Discontinued by the Securities and Exchange Commission (SEC)
Breaking News: PayPal steers clear of Securities and Exchange Commission (SEC) repercussions after a 15-month-long investigation into its stablecoin operations.
The digital payments titan reported in a recent filing that the SEC informed them in February that the investigation into the PayPal USD (PYUSD) stablecoin is now closed, without enforcement action taken.
Last November, the SEC demanded internal documents related to the stablecoin following a subpoena. Typically, these subpoenas ask for internal communications, legal assessments, and reserve documentation, all essential for investigating potential securities violations.
Understanding PYUSD
PayPal's PYUSD stablecoin, issued by Paxos Trust and built on Ethereum, is backed by dollar deposits, short-term Treasuries, and cash equivalents. Despite a powerful brand, PYUSD initially lagged behind giants like Tether (USDT) and Circle (USDC) in market share.
However, recent partnerships and incentives have stirred growth. Last week alone, PayPal announced a partnership with Coinbase, integrating PYUSD across the platform with no fees and 1:1 USD redemptions.
SEA Change in Regulation
The SEC's decision to abandon its probe into PYUSD mirrors a broader regulatory shift under the restructured SEC, with regulators moving away from the aggressive "regulation-by-enforcement" tactic of former SEC Chair Gary Gensler's tenure. Now led by a powerful crypto task force under Commissioner Hester Peirce, the SEC has eased its stance, dropping cases against the likes of Coinbase, Robinhood Crypto, Uniswap Labs, and OpenSea.
Stablecoin Legislation in the Works
As the SEC shifts its stance, lawmakers are also taking action to regulate the stablecoin sector. The House Financial Services Committee recently advanced the STABLE Act, aiming to require dollar-backed stablecoins to be fully collateralized and issued by federal oversight-approved entities. Meanwhile, the Senate's GENIUS Act, also passed committee, suggests a dual-track framework allowing both state and federal chartered issuers.
Both bills aim to establish clear rules for reserves, redemption rights, and anti-money laundering standards, though they differ on the level of power retained by state regulators. As of now, neither bill has become law, yet the drive for regulation indicates a bipartisan urgency to rein in stablecoins, while fostering innovation.
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- PayPal has navigated Securities and Exchange Commission (SEC) scrutiny, closing their 15-month-long investigation into the PayPal USD (PYUSD) stablecoin without enforcement action.
- The SEC's decision to close the probe into PYUSD reflects a broader regulatory shift under the restructured SEC, with regulators moving from the aggressive "regulation-by-enforcement" tactic towards a more lenient approach.
- The House Financial Services Committee has advanced the STABLE Act, a bill aiming to ensure dollar-backed stablecoins are fully collateralized and issued by federally-approved entities.
- The Senate's GENIUS Act, also passed committee, proposes a dual-track framework allowing both state and federal chartered issuers of stablecoins.
- Both the STABLE Act and the GENIUS Act aim to establish clear rules for reserves, redemption rights, and anti-money laundering standards, although they differ on the level of power retained by state regulators.
- The PayPal USD stablecoin, issued by Paxos Trust and built on Ethereum, is backed by dollar deposits, short-term Treasuries, and cash equivalents, initially lagging behind competitors like Tether (USDT) and Circle (USDC) in market share.
- Last week, PayPal announced a partnership with Coinbase, integrating PYUSD across the platform with no fees and 1:1 USD redemptions, stirring growth for the stablecoin.
- looking ahead to 2023, the drive for stablecoin regulation indicates a bipartisan urgency to rein in stablecoins, while fostering innovation in the industry.
- If you're interested in staying updated on the latest news and insights in the world of finance, technology, and investing, including cryptocurrency and decentralized finance (DeFi), sign up for our Daily Debrief Newsletter.
