PayPal (PYPL) received a subpoena from the U.S. Securities and Exchange Commission (SEC) requesting documentation about its USD stablecoin, the global payments giant said in a filing, without providing more details.
"On November 1, 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin," PayPal revealed in its quarterly earnings report filed Wednesday. "The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request."
PayPal's stablecoin was the first from a major financial service firm. The announcement raised concerns in Washington because it was a reminder of the Libra stablecoin, a previous effort by Facebook, now Meta Platforms (META), that didn't come to fruition. The fear from some U.S. regulators is that a token tied to a major tech platform could expand quickly to wide usage and present a threat to U.S. financial stability.
PayPal's stablecoin threatened to push a divided Congressional debate over crypto legislation further apart. Some members, such as House Financial Services Committee's ranking Democrat Rep. Maxine Waters (D-Calif.), said a stablecoin bill would allow big tech to claim that sector of the crypto industry. PayPal's arrival offered a live example of that possibility.
In September, stablecoin issuer Circle intervened in the SEC's case against Binance, arguing that financial trading laws shouldn’t apply to stablecoins, whose value is tied to other assets.
PYUSD is an Ethereum-based token offered to online-payments customers before expanding to the company's Venmo app. PayPal has allowed customers to buy and sell cryptocurrencies since 2020. Since April 2021 it allowed the same service on Venmo. In 2022, PayPal began allowing users to transfer their crypto assets to third-party wallets and expanded that capability to Venmo in April 2023.
UPDATE (Nov. 2, 11:25 UTC): Adds background throughout; corrects date of filing to Wednesday.
UPDATE (Nov. 2, 13:59 UTC): Adds sentence on financial stability in fourth paragraph.
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