SEC Subpoenas PayPal Over PYUSD Shortly After Fintech Giant Secures UK Crypto License

This week has been an eventful one for financial tech giant PayPal, as it received a subpoena from the U.S. Securities and Exchange Commission (SEC) regarding its dollar-backed stablecoin PayPal USD (PYUSD) only a day after the company secured a U.K. crypto license.

U.K. regulator Financial Conduct Authority (FCA) gave PayPal the green light to offer cryptocurrency services in the country Tuesday in a move that is said to mark a significant development in the broader cryptocurrency industry.

As per the registration issued by the FCA, PayPal is now allowed to offer “specific crypto asset activities” in the U.K., which “includes, but is not limited to, ceasing onboarding new customers and restricting existing customers to hold and sell functionality.”

This means that although PayPal secured the registration and approval to offer cryptocurrency services, it cannot accept new customers. Moreover, it can only provide limited services and products concerning crypto asset services to its existing customers.

“The firm cannot expand its current offering in crypto assets,” said the FCA registration, which listed PayPal as the fourth business to receive the FCA’s crypto services registration this year, following Komainu, Bitstamp and Interactive Brokers.

While things are moving forward when it comes to PayPal’s crypto services ambition in the U.K., it received a subpoena from the SEC Wednesday over its PYUSD stablecoin.

“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,” PayPal disclosed.

The SEC’s enforcement action came a few months after PYUSD’s official launch that took place on Aug. 7. At the time, U.S. Representative Patrick McHenry, chairman of the House Financial Services Committee, underlined the potential of stablecoins as a cornerstone of the 21st-century payments system.

“This announcement is a clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st-century payments system,” he said in a statement.

McHenry also said the realization of the full potential of stablecoins is contingent upon “clear regulations and robust consumer protections,” highlighting the importance of enacting legislation that addresses comprehensively digital asset regulation.

Developed to facilitate the use of stablecoins for payments, PYUSD was created by Paxos Trust, a New York-based financial institution and technology company specializing in blockchain. Paxos is the same team behind Binance USD (BUSD).