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PayPal has announced that its US dollar stablecoin, PYUSD, can now be used for cross-border settlements made via Xoom, its proprietary money transfer company.
On Tuesday (November 19), PayPal confirmed that Xoom disbursement partners can now use PYUSD to settle cross-border transfers.
Cebuana Lhuillier, a Philippines-based retailer, and Yellow Card, a pan-African fintech, will be the first two disbursement partners to begin using PYUSD to make payouts.
The move will enable lower-cost transfers when using Xoom, and will also mean that cross-border settlements can take place outside traditional banking hours.
Cebuana Lhuillier, which has worked with PayPal on cross-border disbursements for the past 18 years, is one of the largest micro-financial service providers in the Philippines.
It has 3,500 branches and 25,000 partner agent locations, and connects with Philippine banks and PDAX, one of the country’s largest crypto exchanges.
In turn, PDAX provides cryptocurrency services to GCrypto, the crypto exchange of GCash, the country’s largest digital wallet app (with a 90 percent market share).
Yellow Card is the first and the largest licensed stablecoin on-ramp and off-ramp in Africa, serving 20 jurisdictions across the continent.
It holds a crypto-asset service provider (CASP) licence in South Africa and a virtual asset service provider (VASP) licence in Botswana.
Last year, following the launch of PayPal USD in August, Yellow Card became the first fintech in Africa to list the new stablecoin.
The move builds on PayPal's decision earlier this year to waive transaction fees for Xoom users in the US who use PYUSD to fund their cross-border transfers.
When sending money from the US to El Salvador, Guatemala, Honduras, India, Mexico, Peru or the Philippines, Xoom transaction fees are waived if the user funds the transaction using PYUSD.
The waiver is valid regardless of the currency or disbursement option that will be used by the receiver (e.g., bank account, debit card, mobile money account, cash pickup or stablecoin wallet).
However, transactions that are not completed in USD are subject to a transaction exchange rate, which includes a currency conversion spread.
SEC subpoena still in play
The growing utility and promotion of PYUSD is developing while a subpoena from the US Securities and Exchange Commission (SEC) remains in play.
In November 2023, as covered by Vixio, PayPal disclosed that it had received a subpoena from the SEC’s Division of Enforcement related to PYUSD.
“The subpoena requests the production of documents,” the company said in its 10-Q earnings filing. “We are cooperating with the SEC in connection with this request.”
Since then, PayPal has provided no further information with regard to the subpoena. Its subsequent earnings statements, including its most recent 10-Q, note only that PayPal continues to cooperate with the SEC’s inquiry.
Despite the subpoena, PYUSD grew rapidly during its first year in operation, peaking at a market cap of just over $1bn in August this year.
Paxos, the issuing partner of PYUSD, has also proven itself to be resilient in handling large volumes of redemptions, having redeemed about $450m of PYUSD over the past three months.
SEC’s efforts to apply securities laws to stablecoins
Although the nature of the subpoena remains unclear, it may become more evident under a Trump administration SEC, which is expected to take a more lenient approach towards the application of securities laws to stablecoins and to crypto in general.
Under SEC chair Gary Gensler, the agency has brought several cases involving stablecoins — some resulting in SEC victories and others that have led to the stablecoin charges being thrown out.
The SEC’s biggest success came in July, when it entered into a $4.5bn settlement with Terraform Labs, issuer of the Terra USD stablecoin that collapsed in 2022.
After attempting to overcome the SEC in court, a New York jury found Terraform Labs liable for fraud and unregistered securities violations in relation to its offer and sale of Terra USD.
In September, the SEC entered another settlement with TrueCoin, issuer of the TUSD stablecoin, and TrustToken, operator of a lending platform where TUSD holders could generate yield on their stablecoin holdings.
The SEC alleged that TUSD was offered and sold as an unregistered security, and that the defendants had defrauded investors by falsely claiming that TUSD was fully backed by US dollars.
However, absent an element of fraud, or an explicit reference to a yield or profit-making opportunity, the SEC’s charges against other stablecoin issuers have been less successful.
In its ongoing case against Binance, for example, the SEC initially argued that Binance had offered and sold the BUSD stablecoin as an unregistered security — a charge that was later dismissed.
The SEC had argued that BUSD had “profit potential”, because investors understood that, when buying the stablecoin, some of the returns that Binance made on the sale would be reinvested back into the Binance ecosystem.
Judge Amy Berman Jackson, responding to Binance's motion to dismiss, described the SEC’s argument as a “vague assertion”, and pointed out that the “defining feature” of BUSD was that its “value would remain constant”.
