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  • L Misthos and S Pettigrove

Oceans apart: PayPal navigates clashing regulatory approaches



Global payments provider, PayPal, is facing two starkly different realities in the United Kingdom (UK) and the United States (US). While the UK's Financial Conduct Authority (FCA) has approved PayPal's registration as a crypto asset firm under AML/CTF regulations, across the pond the Securities and Exchanges Commission (SEC) has issued a subpoena to PayPal inquiring about its USD stablecoin.


PayPal's foray into stablecoin issuance is being met with heightened regulatory scrutiny Stateside. The subpoena requests documentation pertaining to PayPal's U.S. dollar-pegged stablecoin, PYUSD.


The SEC has pursued an industry wide "regulation by enforcement" approach (see Ripple, Grayscale, Stoner Cats, Coinbase, Binance to name a few) and has now set its sights on PayPal's stablecoin project, after months of operation. It is unclear whether the SEC issued the subpoena as part of an investigation into alleged breaches of US securities laws or potential enforcement action.


Across the North Atlantic, the UK offices of PayPal are having a better week, with the firm's UK unit entering the FCA's registry of cryptoasset firms that provide "certain cryptoasset activities". Landing on the register means PayPal can create and approve its own advertising communications relating to crypto under a newly imposed marketing regime.


The UK has been one of the more progressive jurisdictions when it comes to crypto asset adoption and regulation. Just this year the UK has adopted the Financial Services and Markets Act 2023, finalised its 'travel rule' plans for crypto, and launched a digital securities sandbox to trial asset tokenisation under tailored regulatory settings.


This tale of two countries demonstrates the divergent approaches adopted by the US (predominantly) and the rest of the world on crypto-assets regulation. On the one end, there are countries who are willing to trial and regulate by establishing regulatory frameworks and guidance with a goal of fostering innovation and consumer protection. On the other hand, there are countries which are pursuing "regulation by enforcement" stifling innovation and prompting innovators to seek more friendly shores.


By Michael Bacina, Steven Pettigrove and Luke Misthos

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