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Payment giant PayPal, a notable player in the financial landscape, finds itself ensnared in the intricate web of regulatory scrutiny, as it has recently come under the radar of the United States Securities and Exchange Commission (SEC) due to its U.S. dollar-pegged stablecoin.
In a disclosure made through the official Q3 financial report submitted to the SEC, it has come to light that the SEC's Enforcement division has dispatched a subpoena to PayPal with regard to its PYUSD stablecoin. This digital representation of the U.S. dollar, which carries a face value of $1.00, has raised questions and prompted the SEC to seek specific documentation from PayPal. Notably, this legal summons reached PayPal's doorstep on November 1, placing a request for the production of certain documents, a request that PayPal has affirmed its commitment to cooperating with.
This development comes at a noteworthy juncture, approximately three months after PayPal's venture into the world of cryptocurrencies with the introduction of the PYUSD stablecoin in early August. Collaborating with Paxos Trust, PayPal designed a stablecoin that derives its stability from U.S. dollar deposits, short-term Treasurys, and other liquid assets. Operating on the Ethereum blockchain, PYUSD is tailored to facilitate digital payments and to support the burgeoning realm of Web3 applications.
Reportedly, PYUSD has witnessed a remarkable reception, with a market capitalization of $150 million achieved in a mere two months following its launch, according to Paxos' spokesperson. As of the latest data available from CoinGecko, PYUSD now boasts a market capitalization of approximately $159 million and a daily trading volume approaching $2.7 million.
PayPal has, at the time of this composition, refrained from providing an immediate request for comments on the matter, adding an element of intrigue to the situation.
The surge in the popularity of PayPal's USD-pegged stablecoin has been further fueled by major cryptocurrency exchanges, such as Coinbase, Crypto.com, Bitstamp, and Kraken, rapidly integrating the stablecoin onto their platforms shortly after its debut. In a strategic move announced in September, PayPal unveiled plans to incorporate the PYUSD stablecoin into the Venmo mobile payment service, enabling users to acquire PYUSD and share it with friends and family.
Going beyond its formidable presence in the U.S. crypto sphere, PayPal has been making inroads into international markets with its crypto endeavors. The company received a seal of approval from the United Kingdom Financial Conduct Authority on October 31, allowing it to offer cryptocurrency services in the UK.
This latest action by the SEC against PayPal underscores the ongoing challenges that crypto companies face within the United States' regulatory landscape. The SEC has initiated legal actions against several leading domestic crypto entities, including its ongoing lawsuit against Coinbase. In a notable turn of events in October 2023, the SEC made the decision to dismiss a long-standing three-year legal dispute against Ripple, the entity behind the XRP cryptocurrency, which holds a prominent position in the cryptocurrency market.
In April 2023, Circle CEO Jeremy Allaire drew attention to the impact of stringent cryptocurrency regulations by U.S. authorities, positing that these regulatory measures played a pivotal role in the declining market capitalization of Circle's USD Coin (USDC), a stablecoin valued at $1.00.
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