Summary:
- The SEC has closed its 15-month investigation into PayPal’s PYUSD stablecoin with no enforcement action.
- The inquiry began with a subpoena in November 2023 requesting internal documents.
- PYUSD is issued by Paxos, backed by U.S. dollar equivalents, and built on Ethereum.
- PayPal plans to expand PYUSD adoption to 20 million merchants by the end of 2025.
- Recent regulatory shifts under the new SEC leadership reflect a more crypto-friendly stance.
- Two key bills, the STABLE and GENIUS Acts, are advancing in Congress to regulate stablecoins.
SEC Ends Investigation Into PYUSD
After over a year of scrutiny, the U.S. Securities and Exchange Commission (SEC) has ended its investigation into PayPal’s PYUSD stablecoin without taking enforcement action. In a filing released this week, PayPal disclosed that the regulator informed them in February that it was “closing this inquiry without enforcement action,” marking a quiet end to a 15-month probe that began in November 2023.
The SEC’s subpoena had requested documents related to the stablecoin, including internal communications and reserve documentation. These are standard tools used by regulators to evaluate potential securities law violations. However, no wrongdoing was found, giving PayPal a clean slate.
What is PYUSD?
Launched on the Ethereum blockchain and issued by Paxos Trust, PYUSD is a U.S. dollar-backed stablecoin supported by short-term Treasury bills, cash deposits, and equivalents. Despite its strong brand presence, PYUSD initially lagged in market share compared to dominant players like Tether (USDT) and Circle (USDC).
However, momentum is building. According to CoinGecko, PYUSD’s market cap surged from under $500 million at the start of 2025 to around $880 million. The recent partnership with Coinbase is expected to accelerate adoption by allowing users to trade, buy, and redeem PYUSD for U.S. dollars without fees.
Ambitious Growth Targets
During PayPal’s Investor Day, executives revealed bold plans to scale PYUSD usage. Michelle Gill, General Manager of PayPal’s small and medium enterprises business, shared the company’s goal:
“The thesis was: Can we facilitate that on PYUSD rails so as not to have the currency conversion, the friction, as well as time?”
PayPal aims to bring PYUSD to 20 million merchants by the end of 2025, transforming it from a niche product into a mainstream financial tool.
SEC’s Softer Stance Under New Leadership
The closure of the PYUSD probe is one of several signs of a shifting regulatory approach under the Trump administration’s restructured SEC. The agency, now led by Commissioner Hester Peirce and a crypto-focused task force, is backing away from the aggressive enforcement tactics seen under former chair Gary Gensler.
Recent dropped cases include investigations into Coinbase, Robinhood Crypto, Uniswap Labs, and NFT marketplace OpenSea, signaling a more conciliatory regulatory climate for crypto firms.
Congressional Focus on Stablecoin Regulation
The SEC’s move comes as U.S. lawmakers intensify efforts to create a clear framework for stablecoin regulation. The House’s STABLE Act and the Senate’s GENIUS Act both aim to impose reserve requirements, redemption rights, and anti-money laundering standards on dollar-backed stablecoins.
The STABLE Act would require stablecoins to be fully collateralized and issued only by approved entities under federal oversight. Meanwhile, the GENIUS Act introduces a dual regulatory pathway, allowing both federal and state-chartered issuers.
Though neither bill has become law, their progress highlights bipartisan recognition of the need to regulate stablecoins while encouraging innovation.
As the regulatory environment evolves, PayPal’s PYUSD seems poised for broader adoption and integration. With the SEC’s green light and Congressional momentum building, the future of U.S.-backed stablecoins appears more structured—and more promising—than ever.