PayPal Holdings has received a subpoena from the Securities and Exchange Commission's division of enforcement related to
The subpoena asked PayPal to produce documents tied to the project, according to a regulatory filing on Thursday. The company is cooperating with the probe, the filing said.
PayPal
For years, U.S. regulators have been scrutinizing stablecoins. Their concerns are twofold: They worry that if a stablecoin crashes, it could trigger fire sales of other assets as their backers try to maintain a peg. They also fear that if stablecoins prove their worth, they could undermine the power of central banks and more easily enable criminals to engage in money laundering.
The issue became a hot topic in Washington amid last year's collapse of the once-popular token TerraUSD, which was an algorithmic stablecoin that sought to maintain a 1-to-1 peg to the U.S. dollar through arbitrage incentives and trading mechanisms. This differs from PYUSD, which is asset-backed.
Lawmakers have been wrangling over legislation that would set out new rules for the tokens. Meanwhile, SEC Chair Gary Gensler has said that stablecoins may be securities and therefore subject to the regulator's strict investor-protection and disclosure rules.
The SEC didn't immediately respond to an emailed request for comment sent outside of normal business hours.
Separately, PayPal said it received a civil investigative demand from the Consumer Financial Protection Bureau in October that focused on Regulation E, which governs electronic fund transfers.
PayPal previously disclosed that the agency had asked the company for information about how it treats customers who accidentally send a payment to the wrong person through its Venmo service.
Under Regulation E, if a hacker logs into an account and sends money, the customer is due a refund. But fraudsters have increasingly sought to use these networks to persuade consumers to send them money. In those cases, the customers moving the money aren't necessarily entitled to a refund.
The CFPB's latest probe is focused on how the company investigates and resolves errors tied to its obligations under Regulation E, according to Thursday's filing. The agency is also probing how Venmo presents transactions to customers' linked bank accounts, the filing said.
PayPal is also cooperating with the CFPB inquiry.
