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PayPal has confirmed receiving a subpoena from the U.S. Securities and Exchange Commission (SEC) concerning its newly released stablecoin, PYUSD. According to a recent report from PayPal, the SEC’s request, issued on November 1, 2023, focuses on the documentation related to the dollar-backed PYUSD, introduced earlier this year.
PayPal stated, “On November 1, 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin. The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request.”
The company acknowledged the ongoing regulatory ambiguities surrounding the use and recognition of stablecoins. PayPal highlighted the potential operational and compliance costs they and the issuers of PYUSD might incur. Furthermore, the company expressed concern over potential reputational damage should PYUSD be classified as a security.
PayPal noted, “The regulatory treatment of stablecoins is evolving and has drawn significant attention from legislative and regulatory bodies around the world, including the SEC. There are uncertainties on how ongoing changes to federal, state, and international laws and regulations would apply to stablecoins in practice, and we and the PYUSD Issuer may face substantial costs to operationalize and comply with any additional or changed requirement.
If we or the PYUSD Issuer fail to comply with regulations, requirements, prohibitions or other obligations applicable to us, we could face regulatory or other enforcement actions, potential fines, and other consequences. In addition, we could face reputational harm through our relationship with the PYUSD issuer if the PYUSD issuer were to face regulatory scrutiny or if PYUSD is deemed to be a security.”
Developed on the Ethereum (ETH) blockchain, PYUSD launched in August. It aims to enhance transaction efficiency within PayPal’s platform. At its launch, PayPal mentioned that PYUSD would enable users to buy, sell, and convert this stablecoin to other digital currencies, like Bitcoin (BTC), through the PayPal app. It was also designed to facilitate seamless payments for various goods and services.