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The U.S. Securities and Exchange Commission has officially concluded its investigation into PayPal’s dollar-backed Stablecoin, Pyusd, and has chosen not to pursue enforcement action, according to its latest 10-Q filing.
The decision, disclosed in the first quarter of 2025 financials, followed the November 2023 subpoena, which raised industry speculations as to whether PYUSD could be treated as unregistered security.
The closure of the issue removes potential legal overhangs for both PayPal and issuer Paxos, indicating a measured regulatory stance against at least some Stablecoin frameworks.
The scope of the SEC subpoena was extensive and requested documentation regarding PYUSD activity, but it did not cease to claim any particular violation. The agency’s decision has coincided with other moves since Gary Gensler’s departure.
The exemption from further investigation from PYUSD could strengthen the legislative momentum behind the Genius Act.
Introduced as S. 919, the bill would require assistance with federal or state-level issuers, 1:1 reservations, and require monthly disclosure.
PayPal Pyusd
Paxos, a NYDFS regulatory trust company, launched PYUSD in August 2023 as Stablecoin, the first payment brand from a well-known US fintech. The issuance is fully supported by cash and short-term US Treasury bills, with monthly proofs published.
PayPal has integrated assets, including Venmo, into its own platform and enabled external ERC-20 transfers. PYUSD’s circular supply is approximately $879 million, accounting for less than 0.5% of the global Stablecoin market of $241 billion.
Coinbase recently exempted PYUSD’s transaction fees and added one-click redemption to USD.
Despite its relatively modest market share compared to incumbents such as USDT and USDC, PayPal frames PYUSD as the center of its broader Stablecoin strategy.
The company’s roadmap includes providing over 20 million small businesses with the ability to resolve PYUSD payments throughout 2025. Movement has posted PayPal to bypass traditional card networks and build native Stablecoin-based payment rails.
PayPal continues to acknowledge the management and legal uncertainty associated with digital asset storage. In its risk disclosure, the company points out that custody crypto assets may not receive traditional bankruptcy protection.
User funds have warned that they could be treated as part of custodian real estate in bankruptcy events. These warnings remain unresolved, but the absence of SEC enforcement in the PYUSD case provides some clarity in a fragmented regulatory environment.
Stubcoin Regulations in the US
The SEC decision will arrive again as other PayPal regulatory investigations remain open. The Consumer Financial Protection Agency issued private research demand for backup funding for PayPal credits in August 2024, with the German federal cartel office continuing another antitrust review. However, neither of these issues relates to PYUSD or its crypto-related features.
A recent April statement from SEC staff revealed that a specific subset of USD-backed, fully booked, non-Yield-containing stubcoins (“covered stubcoins”) is not considered security under federal securities laws. Howie or rotate test.
However, this guidance is limited in scope and does not address any kind of stubcoin, nor does it constitute formal rulemaking or committee-wide decisions.
Although there is no conclusive ruling regarding the status of stablecoins under the securities law, the SEC setback in this case reinforces the rhetoric that enforcement is not the mechanism by which the rules for dollar-supported tokens are ultimately shaped. Instead, the contours of Stablecoin surveillance could emerge from Congress.
