Despite a couple of recent setbacks in court, the Securities and Exchange Commission is continuing to look into crypto as TradFi firms get more involved.
As part of its third-quarter earnings on Wednesday, online payments giant PayPal disclosed that the regulator had sent it a subpoena related to PayPal USD, the stablecoin it launched in August. The company said it was cooperating with the subpoena from the SEC's Enforcement Division, which asked for related documents. PayPal didn't immediately respond to Fortune's request for comment.
PayPal made a big leap in adopting blockchain technology when it launched the stablecoin, a cryptocurrency pegged to the U.S. dollar. PayPal worked with New York–based Paxos to launch the token, which can be transferred between PayPal and an external crypto wallet, used for purchases through PayPal, or converted into other cryptocurrencies supported by the payments firm. At launch, the company said it would soon integrate the stablecoin with its mobile payment service, Venmo.
The company launched the stablecoin following a pause brought on by the New York Department of Financial Services’ investigation into Paxos, the issuer of the coin. In February, the state agency ordered Paxos to stop minting BUSD, the stablecoin it issued on behalf of Binance, “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD.” As a result, Paxos ended its relationship with Binance.
The SEC has continued flexing its regulatory muscle in the crypto industry despite two recent court losses in cases against Grayscale and Ripple Labs. The agency has also dragged its feet on approving a spate of newly filed spot Bitcoin ETFs from TradFi firms such as BlackRock and Fidelity.
The agency’s subpoena of PayPal does not necessarily indicate it will sue the company. And despite the news, the firm reported strong third-quarter results. New CEO Alex Chriss made clear that the company will continue to improve its bottom line through cost cutting and improving efficiencies.
The combination of strong numbers and Chriss’s comments shot up PayPal’s shares more than 7% in pre-market trading Thursday. The stock was still up more than 6%, near $55, at time of publication.
