PayPal, a major player in online payments, is now in the spotlight as the U.S. Securities and Exchange Commission (SEC) starts investigating its new PYUSD stablecoin. In their most recent financial report, PayPal revealed that they received a request from the SEC to share documents related to PYUSD.
PayPal has assured that they are cooperating with the SEC’s request for information. It’s important to know that SEC subpoenas are mainly for gathering evidence and do not necessarily suggest any wrongdoing or legal actions in the works.
Turning to Stablecoins
However, this investigation highlights the increased focus on stablecoins, particularly following the well-publicized troubles at FTX. Regulators are now asking for concrete proof to back up claims about having enough real money in reserve (1:1 fiat reserves) and for more transparency about how stablecoins are supposed to work.
Last August, PayPal introduced PYUSD in partnership with Paxos. This was a big deal because it was the first time a major financial company created a stablecoin. At first, this raised concerns in Washington about big tech firms dominating the digital money scene.
Slow Start for PYUSD
But the new Ethereum-based PYUSD hasn’t exactly taken off. There are only around 159 million PYUSD coins out there, which doesn’t seem like much for a PayPal product. Still, regulators are getting tougher on stablecoins due to recent market turmoil.
The SEC had previously said Paxos’ BUSD was an unregistered security when they took legal action against Binance in June. Paxos, however, argues that BUSD isn’t a security and is ready to defend itself against these claims.
With PayPal now under the SEC’s watchful eye, it’s clear that concerns about big tech companies and their stablecoins are growing. The slow growth of PYUSD means the SEC’s investigation might lose steam if they don’t find any wrongdoing. Nonetheless, this investigation shows that tech giants face challenges when they try to create stablecoins, especially after the issues at FTX.