PayPal, the online payment giant, is facing increased scrutiny from the U.S. Securities and Exchange Commission (SEC) over its launched stablecoin called $PYUSD. A stablecoin is a type of cryptocurrency that is pegged to a fiat currency, such as the U.S. dollar, to reduce volatility and facilitate transactions. PayPal announced its intention to create PYUSD in October 2023, as part of its broader strategy to expand its presence in the crypto space.
However, the SEC is reportedly concerned about the regulatory status and compliance of PYUSD, as well as its potential impact on the financial system. According to Bloomberg, the SEC has sent a letter to PayPal requesting information about how PYUSD will be backed, issued, distributed, and marketed. The SEC also wants to know how PayPal will ensure that PYUSD will maintain a 1:1 parity with the U.S. dollar, and what safeguards it will have in place to prevent money laundering, fraud, and other illicit activities.
The SEC’s inquiry is part of its ongoing efforts to regulate the fast-growing stablecoin market, which has surpassed $130 billion in total value. The SEC has previously warned that some stablecoins may be considered securities under federal law, and thus subject to registration and disclosure requirements. The SEC has also expressed concerns about the systemic risks posed by stablecoins, especially if they are widely adopted by consumers and businesses without adequate oversight and supervision.
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However, not all stablecoins are created equal, and some of them may pose significant risks to investors and the financial system. The U.S. Securities and Exchange Commission (SEC) defines a security as any investment contract, which is an agreement in which a person invests money in a common enterprise and expects to profit from the efforts of others. The SEC applies a four-part test, known as the Howey test, to determine whether an investment contract exists. The test asks whether:
There is an investment of money.
There is a common enterprise.
There is an expectation of profit.
The profit is derived from the efforts of others.
Some stablecoins may meet these criteria and be considered securities under federal law. For example, some stablecoins are backed by a pool of assets that are managed by a third party, such as a company or a foundation. These stablecoins may create an expectation of profit among investors, who may benefit from the appreciation of the underlying assets, or the fees generated by the pool. Moreover, these stablecoins may depend on the efforts of others, such as the managers of the pool or the issuers of the stablecoins, to maintain their stability and value.
If a stablecoin is deemed to be a security, it must comply with the federal securities laws, which require registration with the SEC and disclosure of material information to investors. Registration and disclosure are intended to protect investors from fraud and manipulation, and to ensure fair and efficient markets. Failure to comply with these requirements may result in civil or criminal enforcement actions by the SEC or other regulators.
Therefore, investors should be aware of the potential legal implications of investing in or using stablecoins, especially those that are not fully backed by fiat currencies or other liquid assets. Stablecoins that are considered securities may expose investors to additional risks and obligations and may limit their ability to access or redeem their funds. Investors should also conduct their own due diligence and research before investing in any stablecoin and consult with legal and financial professionals if they have any questions or concerns.
PayPal has not publicly commented on the SEC’s investigation, but it has previously stated that it is committed to complying with all applicable laws and regulations in its crypto endeavors. PayPal has also said that it is working closely with regulators and industry partners to ensure that its stablecoin will be safe, secure, and transparent. PayPal hopes that PYUSD will enable more people to access the benefits of digital currencies, such as lower costs, faster speeds, and greater inclusion.
PayPal is not the only company that is facing regulatory heat over its stablecoin plans. Facebook’s Diem (formerly Libra), which aims to launch a global stablecoin network, has faced fierce opposition from regulators around the world since its announcement in 2019. The project has been delayed several times and has undergone major changes in its scope and design. Other stablecoin issuers, such as Tether and Circle, have also been under pressure to provide more transparency and accountability about their reserves and operations.
Solana goes live on Google Cloud’s Big Query, Bitfinex placed on UK financial regulator’s Warning list
Solana, the high-performance blockchain network that aims to scale crypto to the masses, has announced a major integration with Google Cloud’s BigQuery platform. This means that anyone can now access and analyze Solana’s on-chain data using Google’s powerful data analytics tool.
BigQuery is a cloud-based service that allows users to run SQL queries on large datasets and get insights in seconds. It is widely used by businesses, researchers, and developers to explore and visualize data from various sources. Solana’s integration with BigQuery will enable users to query Solana’s ledger, transactions, events, and smart contracts with ease and speed.
Solana’s co-founder and CEO, Anatoly Yakovenko, said that the integration will open up new possibilities for Solana’s ecosystem and users. “Solana was built to support the next generation of decentralized applications that require global scale, speed, and low costs. By making Solana data available on BigQuery, we are unlocking the power of data for our developers, validators, and users. They can now leverage Google Cloud’s infrastructure to analyze Solana data in real-time and build innovative solutions on top of our platform.”
One of the benefits of using BigQuery to analyze Solana data is that users can join Solana data with other public datasets available on Google Cloud, such as Ethereum, Bitcoin, Filecoin, CryptoKitties, and more. This will allow users to perform cross-chain analysis and discover new patterns and insights across different blockchain networks.
Another benefit is that users can use BigQuery’s built-in machine learning and AI capabilities to create predictive models and generate insights from Solana data. For example, users can use BigQuery ML to train and deploy machine learning models that can forecast Solana’s network activity, transaction fees, token prices, and more.
Solana is not the first blockchain network to integrate with BigQuery. In fact, Google Cloud is a leader in providing cloud services for the blockchain industry. Google Cloud is also a validator on Solana’s network, as well as other networks such as Hedera Hashgraph, Theta Network, Oasis Network, and more.
Solana’s integration with BigQuery is another step towards its vision of becoming the world’s fastest, most scalable, and most user-friendly blockchain platform. With over 400 projects building on Solana, including decentralized exchanges, stablecoins, NFT platforms, gaming applications, and more, Solana is poised to become a major force in the crypto space.
Bitfinex placed on UK financial regulator’s warning list of unauthorized firms.
Bitfinex, one of the largest cryptocurrency exchanges in the world, has been placed on the warning list of unauthorized firms by the UK Financial Conduct Authority (FCA). This means that the FCA does not regulate Bitfinex and that consumers who use its services may not be protected by the UK’s financial compensation schemes or dispute resolution services.
The FCA issued the warning on November 3, 2023, stating that Bitfinex is “providing regulated products or services in the UK without our authorization”. The FCA also advised consumers to be wary of dealing with Bitfinex and to check its register of authorized firms before investing.
Bitfinex is based in Hong Kong and claims to have more than 1.4 million users worldwide. It offers trading services for various cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Tether. Bitfinex is also the issuer of Tether, a controversial stablecoin that is supposed to be backed by US dollars but has faced allegations of fraud and manipulation.
Bitfinex has not responded to the FCA’s warning as of yet, but it has previously denied any wrongdoing and said that it complies with all applicable laws and regulations. However, Bitfinex has also faced legal troubles in other jurisdictions, such as the US and New York, where it was accused of hiding losses of $850 million and misleading investors.
The FCA’s warning is part of its efforts to crack down on the risks posed by the cryptocurrency sector, which it considers to be “very high-risk, speculative and unregulated”. The FCA has also banned the sale of certain crypto derivatives to retail consumers and warned that investors should be prepared to lose all their money if they invest in cryptoassets.