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In a notable development, PayPal, a major player in the payments industry, has come under the scrutiny of U.S. regulators just three months after venturing into the stablecoin sector. The Securities and Exchange Commission (SEC) has issued a subpoena related to PayPal’s U.S. dollar-pegged stablecoin, PYUSD, as reported by Reuters. TechCrunch has reached out to PayPal for their response to this development.
PayPal’s Entry into the Stablecoin Space
Back in August, PayPal launched PYUSD, a stablecoin issued by Paxos Trust Company and backed by U.S. dollar deposits. At the time of the launch, the company had indicated that this digital currency solution would be gradually made available to users in the United States. In September, PayPal expanded the availability of PYUSD to Venmo users.
PYUSD Features and Functionality
With the PayPal app, users have the ability to purchase and sell PYUSD, convert it to other cryptocurrencies like Bitcoin, make payments at numerous online stores, send stablecoins to friends on PayPal within the United States without incurring fees, or transfer the tokens to external Ethereum wallets.
PayPal’s Pioneering Role
PayPal’s entry into the stablecoin market marks a significant development, as it is the first major U.S. financial institution to offer stablecoins for payments and transfers. This move has not gone unnoticed by U.S. regulatory authorities, who have increasingly focused on tech companies’ involvement with digital currencies.
Regulatory Scrutiny and Implications
The regulatory attention on PayPal may raise further concerns within the U.S. stablecoin space, which has already faced challenges, including those encountered by Circle, a payments-focused crypto company that supports the widely used USD-pegged stablecoin USDC. Circle’s plans to go public were hindered by questions raised by the SEC, as reported by The Wall Street Journal.
Differing Views on Regulation
SEC Chairman Gary Gensler has expressed reservations about stablecoins, citing their potential systematic risks to financial stability. In contrast, Jeremy Allaire, CEO of Circle, has argued that the SEC might not be the most suitable regulator for stablecoins given their primary focus on payments.
Global Development of Stablecoins
While U.S. regulators continue to scrutinize stablecoins, other regions and entrepreneurs are actively promoting their development. Stablecoins are viewed as a more practical form of cryptocurrency for value exchange compared to highly volatile tokens. For instance, Hong Kong is actively working to establish a regulatory framework for stablecoins by 2024. The European Union has also implemented regulatory safeguards for stablecoin usage, with companies like Monerium offering regulated euro-denominated tokens.
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