PayPal's PYUSD Stablecoin Investigation Dropped by the SEC

The decision offers another insight into the current SEC's stance on stablecoins.

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PayPal has said the SEC has dropped its investigation of PYUSD.

The decision offers another insight into the current SEC’s stance on stablecoins.

PayPal is looking to make strides in the cryptocurrency industry with PYUSD as the focus.

After taking office in 2023, Chair Gary Gensler's focused on highlighting several cryptocurrency-related enforcement actions and investigations, arguing that most cryptocurrencies were unregistered securities.

The agency also closed or paused and dismissed cryptocurrency-related enforcement actions and investigations as part of a broader pro-crypto shift under President Donald Trump.

This year, several cryptocurrency-related probes by the SEC were dropped, offering a glimpse into the agency’s priorities and focused on specific types of crypto products and activities.

PayPal (NASDAQ:PYPL) has said that the SEC has ended a probe of its dollar-backed stablecoin product, PayPal USD or PYUSD.

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The probe was announced in December 2023, noting that the SEC is investigating whether PayPal should have registered PYUSD with the agency.

In a filing, PayPal said the SEC closed its investigation of PYUSD “without enforcement action.”

Earlier this year, the SEC's Division of Corporation Finance staff issued guidance stating that it did not view fully backed dollar-pegged stablecoins marketed for payments and not for interest or yield as security offerings.

The agency said it was considering whether to pursue no-action letters or propose formal rulemaking on the matter.

"We generally view tokens that are fully backed and redeemable one-for-one with a dollar-denominated instrument, such as a U.S. Treasury instrument, and that are marketed and sold for use in payment networks or other immediate consumption, as less likely to be securities," the staff said in March.

The regulator added that it would not view tokens sold in a "portals orrisky token issuers,operability concerns.

"Where tokens are sold in a manner that does not implicate Section 5 of the Securities Act, they would not be subject to the registration provisions of the federal securities laws," the staff said.

"In addition, we generally view tokens that are fully backed and redeemable one-for-one with a dollar-denominated instrument, such as a U.S. Treasury instrument, and that are marketed and sold for use in payment networks or other immediate consumption, as less likely to be securities."

PYUSD was launched in August 2023 as part of PayPal's broader efforts to expand its presence in the cryptocurrency industry.

The move comes as the Biden administration continues to weigh how to best regulate the cryptocurrency industry.

"We are focused on providing a service that can be broadly inclusive to U.S. consumers and advancing the role of digital currency in the U.S.,” Jeff Garbrick, chief technology officer at PayPal, said during the firm’s Q1 earnings call on Tuesday.

Earlier this year, PayPal unveiled a loyalty offering for U.S. users holding PYUSD in their PayPal and Venmo wallets, offering 3.7% annual rewards on balances up to $25,000.