PayPal has confirmed that the U.S. Securities and Exchange Commission concluded its investigation into the company’s dollar-pegged stablecoin, PayPal USD (PYUSD).
The regulatory agency opted not to pursue any enforcement action, as PayPal disclosed in its quarterly report filed April 29. The filing states, “In February 2025, the SEC communicated it was closing this inquiry without enforcement action.” This marks the end of a probe initiated by an SEC subpoena in November 2023, which requested documents concerning the stablecoin.
While the filing confirms the investigation’s closure, neither PayPal nor the SEC have publicly detailed the specific reasons behind the decision to close the inquiry without action. A stablecoin is a type of cryptocurrency designed to maintain a steady value, typically by pegging it 1:1 to a fiat currency like the U.S. dollar, using reserves as backing.
Background on PYUSD and Paxos Oversight
PayPal introduced PYUSD in August 2023, positioning it for payments within web3 and various digital transaction environments. The stablecoin is issued and managed by Paxos Trust Company, a firm regulated by the New York State Department of Financial Services (NYDFS). It functions as an ERC-20 token on the Ethereum blockchain.
According to PayPal’s official product page, PYUSD is fully backed by U.S. dollar deposits, short-term Treasury bills, and similar cash equivalents, ensuring 1:1 redeemability for U.S. dollars.
The SEC’s decision regarding PYUSD follows prior agency actions involving Paxos. The SEC issued a Wells notice to Paxos in February 2023 concerning Binance USD (BUSD), another stablecoin issued by the company, alleging it was an unregistered security.
A Wells notice indicates the SEC staff intends to recommend enforcement action. Paxos subsequently stopped issuing new BUSD following NYDFS direction. The PYUSD probe closure also occurs amidst the SEC’s broader, sometimes contentious, interactions with other crypto industry firms, including ongoing cases against Coinbase and Binance.
Recent Efforts to Bolster PYUSD
Leading up to the public confirmation of the probe’s closure, PayPal had already initiated significant moves to integrate PYUSD further into its ecosystem. On April 23, the company announced a rewards program offering a 3.7% annual return on PYUSD holdings for eligible U.S. customers within its platform.
This was quickly followed by an expanded partnership with Coinbase on April 24, designed to increase PYUSD adoption among Coinbase’s user base, enabling fee-free trading and direct 1:1 redemption. PayPal CEO Alex Chriss commented on the Coinbase deal, stating, “We are excited to drive new, exciting, and innovative use cases together with Coinbase and the entire cryptocurrency community, putting PYUSD at the center.” The potential reach involves PayPal’s user base, cited in the press release as exceeding 430 million accounts.
Despite these efforts and a reported 75% increase in circulating supply since the start of 2025, PYUSD’s market capitalization—the total value of its circulating supply—remains around $880 million, significantly trailing competitors like Tether (USDT) according to data from CoinGecko. Since its launch, PYUSD has also become available on PayPal’s Venmo platform.
Company Strategy and Broader Regulatory Context
The focus on PYUSD aligns with CEO Alex Chriss’s strategy, discussed during an investor day in February, to unify operations and prioritize profitability. The company’s first-quarter 2025 financial results surpassed analyst expectations, showing $1.33 adjusted earnings per share on $7.8 billion in revenue.
Nevertheless, PayPal retained its prior full-year earnings forecast, maintaining a cautious outlook. CFO Jamie Miller attributed this to the broader economic climate, stating, “Given uncertainty in the environment and the potential for a wide range of outcomes, we are appropriately cautious.” This cautious outlook reflects not only economic conditions but also the complex regulatory environment PayPal navigates, which includes ongoing interactions with the FTC and CFPB in the U.S. and administrative proceedings in Germany concerning merchant terms, as detailed in its 10-Q.
