The U.S. Securities and Exchange Commission (SEC) has dropped its investigation into PayPal’s PYUSD stablecoin. This development may mark a shift in the regulatory landscape for U.S. dollar-backed digital assets.

SEC Ends PayPal PYUSD Probe Without Enforcement

On April 29, PayPal confirmed that the SEC has closed its investigation into PYUSD. The company stated that the SEC informed them of this decision earlier this year. According to the filing, “the SEC staff has concluded the investigation and does not intend to recommend enforcement action.”

The investigation began in November 2023 when the SEC’s Division of Enforcement issued a subpoena to PayPal. The probe focused on the structure and issuance of PYUSD. PayPal’s latest disclosure to the SEC ends months of regulatory scrutiny for the stablecoin.

What PYUSD’s Win Means for the Stablecoin Market

The closure of the SEC’s PYUSD case removes uncertainty for PayPal and its users. The stablecoin market requires an additional unified regulatory structure beyond its current state. PYUSD functions as a stable token supported by dollar deposits under the issuance of Paxos Trust Company. The Paxos Trust Company issues its Binance USD (BUSD) product, but this stablecoin recently faced enforcement action from regulators in 2023.

The case against this particular stablecoin issuer stopped despite recent US regulatory actions against other stablecoin providers. U.S. regulators seem to adopt a selective policy when dealing with cases one at a time. 

Future investigations related to stablecoin initiatives may be impacted by this particular decision. But it does not mean the sector now operates without oversight.

Regulatory Clarity Still Uncertain Despite PYUSD Decision

Although PayPal’s case has closed, stablecoins remain in a regulatory grey area. In early 2025, President Donald Trump signed the Stablecoin Transparency and Licensing Enforcement (STABLE) Act. Standards for transmitting reserve information and registering issuers appear in the Act.

The STABLE Act requires stablecoins to operate with a one-to-one backing system while scheduled regular audits become mandatory. Tether and Circle are included among the issuers subject to the Act. State agencies along with federal organizations demonstrate uneven compliance with existing legislation.

The Blockchain Association published an assessment in February 2025, which states that businesses remain confused by the divergent regulatory approaches. Numerous businesses struggle to determine acceptable methods of upholding state and federal laws.

Experts See Case Closure as Positive Signal, Not Legal Precedent

Legal experts view the SEC’s move as a positive sign for stablecoin providers, though not a legal benchmark. “This is not a blanket approval of PYUSD or similar assets,” said Hailey Lennon, partner at Brown Rudnick LLP. “But it reduces the perception of imminent regulatory threats.”

Still, the crypto community awaits formal rulemaking on stablecoins. The SEC’s dismissal of the PYUSD probe does not offer official clarity on whether stablecoins are securities.

The Financial Stability Oversight Council (FSOC) in its 2024 report recommended that Congress pass federal laws governing stablecoins. The report highlighted risks tied to market integrity, systemic use, and liquidity.