PayPal has cleared a key regulatory hurdle as the U.S. Securities and Exchange Commission (SEC) has officially closed its investigation into the company’s stablecoin, PYUSD, with no enforcement action recommended. The development marks the end of a nearly two-year inquiry and offers potential precedent for how regulators may treat stablecoin issuers going forward.
In a recent filing, PayPal disclosed that it received notice in February 2025 confirming the investigation’s closure. The probe originated in November 2023, shortly after PYUSD’s launch, when the company received a subpoena requesting documents related to the coin’s operations. While the SEC did not reveal the specific scope, such investigations typically examine internal communications, reserve audits, and legal interpretations.
Launched in August 2023 in partnership with Paxos Trust Company, PYUSD is a fully backed, dollar-pegged stablecoin designed to enable seamless digital payments. The SEC’s decision to stand down could be seen as a nod to PYUSD’s compliance, at least under the current regulatory climate.
This resolution comes amid a broader push to formalize oversight of the stablecoin market, with U.S. lawmakers actively debating new digital asset legislation. As Congress weighs the GENIUS Act and similar proposals, the SEC’s de-escalation may influence how future stablecoin efforts are evaluated.
SEC Retreats From Enforcement as Crypto Stance Softens
The closure of the PayPal case is part of a growing trend: the SEC’s shift away from aggressive crypto enforcement under the Trump administration. Once marked by a “regulation-by-enforcement” strategy under former Chair Gary Gensler, the agency now appears to be rethinking its approach.
Over recent months, the SEC has quietly closed multiple high-profile crypto investigations—including those involving Coinbase, Robinhood Crypto, Uniswap Labs, and OpenSea—without recommending penalties.
This pivot coincides with a growing internal push for reform, led by Commissioner Hester Peirce, a longtime crypto advocate. Under her leadership, the agency’s digital assets task force has signaled a greater willingness to engage with the sector constructively, rather than pursue litigation-first tactics.
For stablecoin issuers and broader crypto businesses, the move suggests a more collaborative regulatory future—one that still emphasizes compliance and consumer protections but avoids stifling innovation through heavy-handed enforcement.
Lawmakers Move to Establish Stablecoin Framework
The SEC’s decision to end the PYUSD probe comes as Congress accelerates efforts to regulate stablecoins, aiming to bring greater clarity to a fast-growing segment of the digital economy.
Earlier this month, the House Financial Services Committee advanced the STABLE Act, which would require all stablecoins to be fully dollar-backed, redeemable at par, and issued only by federally approved entities. The bill aims to protect consumers while reinforcing systemic stability.
Meanwhile, the Senate is reviewing the GENIUS Act, a more flexible legislative alternative that would allow both federal and state-chartered institutions to issue stablecoins. The proposal also includes mandates for reserve transparency, AML compliance, and user safeguards.
Though neither bill has yet passed both chambers, the bipartisan urgency reflects growing consensus that stablecoin oversight must be codified. As the SEC pulls back, lawmakers appear increasingly ready to build a durable regulatory foundation for stablecoins and other tokenized financial instruments.
Quick Facts
- The SEC has closed its investigation into PayPal’s PYUSD with no enforcement action taken.
- PYUSD’s supply grew 75% in early 2025, reaching a market cap of $880 million.
- PayPal introduced a 3.7% annual yield loyalty program to boost adoption.
- The SEC’s decision could influence forthcoming stablecoin legislation, including the GENIUS Act.
