PayPal has disclosed it received a subpoena from the Securities and Exchange Commission (SEC) tied to its U.S. dollar stablecoin, PYUSD, marking yet another milestone at the intersection of traditional finance and digital currencies, according to reports.
As Reuters reported, this significant development follows PayPal’s pioneering move in August, when the tech giant became the first in its field to embrace digital currencies for payments and transfers.
PayPal’s leap into digital currencies began with the launch of PayPal USD (PYUSD), a stablecoin fully backed by U.S. dollar deposits, U.S. Treasuries, and similar cash equivalents, as CryptoSlate reported in August.
PayPal issues outside the U.S.
However, this crypto frontier has not been without roadblocks. Despite successfully registering with the United Kingdom’s Financial Conduct Authority (FCA) to offer crypto services in the country, PayPal faces several restrictions in its crypto activities. The digital giant is prohibited from allowing new customers to buy new crypto assets, expanding its current offering in crypto assets, and operating an automated process to exchange crypto assets for money without the FCA’s approval.
These restrictions shed light on the broader regulatory climate surrounding crypto activities globally. On Oct. 31, before PayPal’s SEC subpoena, the U.K. Treasury published a proposal to integrate crypto activities into the financial services regulation.
As per the proposal, all crypto-related firms will require authorization from the Financial Conduct Authority to operate in the country. This move toward regulation has been mirrored in multiple jurisdictions worldwide, underscoring the complex regulatory challenges that corporations like PayPal must navigate in this dynamic sector.
PayPal PYUSD vs SEC.
PayPal’s PYUSD, an ERC-20 token issued on the Ethereum blockchain, was launched to bridge the gap between fiat and digital currencies for consumers, merchants, and developers. Yet, as the SEC subpoena indicates, the road to achieving this objective is fraught with regulatory obligations that must be thoroughly considered and addressed.
Transparency remains a crucial factor in navigating these challenges. To this end, Paxos Trust Company, the overseer of PayPal USD issuance, has committed to publishing a public monthly Reserve Report for PayPal USD from Sept. 2023. This report provides a transparent view of the reserves for PayPal USD, further bolstered by a third-party…
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