SEC Ends Probe Into PayPal’s PYUSD Stablecoin, Paving Way for Growth

PayPal launched PYUSD in August 2023, aiming to integrate a stablecoin into its extensive payment ecosystem. The stablecoin, issued by Paxos Trust Company, is fully backed by U.S. dollar deposits and short-term Treasury bills, ensuring a 1:1 peg with the U.S. dollar.

However, in November 2023, the SEC's Division of Enforcement issued a subpoena to PayPal, requesting documents related to PYUSD. This move was part of the SEC's broader scrutiny of stablecoins, which are digital tokens designed to maintain a stable value by being pegged to a reserve asset, such as the U.S. dollar. The regulatory body has expressed concerns about the potential risks stablecoins may pose to financial stability and investor protection.

After nearly 15 months of investigation, PayPal disclosed in its Q1 2025 earnings report that the SEC had informed the company in February 2025 of its decision to close the inquiry without pursuing any enforcement action. This outcome was officially announced on April 29, 2025.

The closure of the SEC's investigation is a significant win for PayPal, allowing the company to focus on expanding PYUSD's adoption without the overhang of regulatory uncertainty. In response to the favorable regulatory outcome, PayPal has intensified its efforts to promote PYUSD.

One notable initiative is the offering of a 3.7% annual yield to U.S. users who hold PYUSD, a move designed to attract more users to the stablecoin. Additionally, PayPal has formed a partnership with Coinbase, one of the largest cryptocurrency exchanges, to enhance PYUSD's accessibility and liquidity in the crypto market.

These strategic moves have borne fruit; PYUSD's supply has surged by 75% in 2025, reaching a market capitalization of approximately $880 million. Despite this growth, PYUSD still trails behind leading stablecoins like Tether (USDT) and USD Coin (USDC) in terms of market cap.

The SEC's decision to drop the PYUSD investigation aligns with a broader trend of the agency concluding probes into various crypto-related firms without enforcement actions. In recent months, the SEC has ended investigations into companies such as Crypto.com, Robinhood Crypto, Coinbase, and Gemini. This pattern suggests a potential shift in the SEC's regulatory stance under its current leadership, possibly indicating a more measured approach to digital asset regulation.

Furthermore, the timing of the SEC's decision coincides with ongoing legislative efforts in the U.S. Senate to establish a comprehensive regulatory framework for stablecoins. Proposed legislation aims to address issues such as reserve requirements and consumer protection, providing clearer guidelines for stablecoin issuers. The SEC's move may influence the debate surrounding this legislation, as lawmakers consider the appropriate regulatory approach for these digital assets.

With the regulatory cloud lifted, PayPal is poised to accelerate PYUSD's integration into its suite of financial services. The company has set an ambitious target to onboard 20 million merchants to accept PYUSD by the end of 2025. This expansion includes plans to integrate PYUSD into PayPal's bill-pay product, facilitating merchant payments to vendors.

As PayPal continues to leverage its vast user base and infrastructure, PYUSD could play a pivotal role in bridging traditional finance and the burgeoning world of digital assets. The SEC's decision not only benefits PayPal but also sets a precedent that may encourage other financial institutions to explore stablecoin offerings, potentially reshaping the landscape of digital payments.