U.S. SEC Drops Investigation Into PayPal’s Stablecoin PYUSD

The U.S. Securities and Exchange Commission (SEC) has officially dropped its investigation into PayPal’s U.S. dollar-denominated stablecoin, PYUSD, signalling a potential shift in regulatory posture toward digital assets issued by mainstream financial entities.

PayPal disclosed the SEC’s decision in a regulatory filing on April 29, 2025, bringing an end to months of uncertainty surrounding the fintech giant’s entry into digital currencies. 

According to the filing, the SEC’s Enforcement Division issued a formal notification and stated that it “does not intend to recommend an enforcement action” against the company. 

This move effectively clears PayPal of any potential securities law violations related to the launch and operation of its stablecoin, PYUSD.

However, PayPal noted that, due to the increasing legislative and regulatory uncertainty surrounding cryptocurrency, the company may be subject to additional licensing and regulatory obligations, as well as inquiries or investigations from various regulators and governmental authorities.

Consequently, this may require the company to make product changes, restrict or discontinue product offerings in certain markets, implement additional and potentially costly controls, or take other actions.

How the U.S SEC’s Investigation Into PYUSD Started

The U.S. SEC launched an investigation into PYUSD in November 2023, three months after PayPal launched PYUSD in August 2023, becoming the first major U.S. financial technology firm to launch its stablecoin.

“In November 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin. The subpoena requested the production of documents. In February 2025, the SEC communicated it was closing this inquiry without enforcement action,”

PayPal stated in the filing.

The coin was issued in partnership with Paxos Trust Company and fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents.

It was designed to facilitate faster and cheaper digital payments across platforms. And can be redeemed 1:1 for U.S. dollars.

Despite the investigation, PayPal maintained that PYUSD was structured with consideration of appropriate regulations.

In addition, Paxos, the stablecoin’s issuer, has been regulated by the New York State Department of Financial Services and has worked closely with authorities to ensure transparency and security in the coin’s reserves.

Nevertheless, PayPal has been working to actualize its goal for issuing the stablecoin. Recently, the company struck a partnership deal with Coinbase to Drive Innovation in Stablecoin-based Solutions.

The partnership will provide PayPal users with a straightforward way to fund cryptocurrency purchases on Coinbase.

U.S. Congress Introduces Stablecoin Regulatory Framework

Previously, a report had it that the U.S. Congress had advanced the STABLE Act to regulate stablecoins, aiming to enhance transparency, protect consumers, and establish clear rules for dollar-backed digital tokens in the evolving digital economy.

This aligns with the calls from U.S. lawmakers and industry groups for clearer rules regarding digital assets, particularly dollar-backed digital tokens, to foster innovation while ensuring consumer protection.