Forbes writes that the "SEC's Enforcement Division Targets PayPal's New Stablecoin." The piece explains, "PayPal is the latest company to catch the U. S. Securities and Exchange Commission's attention for its stablecoin. On November 1, PayPal revealed in a 10-Q filing it 'received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD.' PayPal stated it will comply with the request. This is not the first time the SEC has targeted a key stablecoin player. In light of the SEC's continued investigations into issuers and other stablecoin market participants, it's worth comparing the structure of PayPal’s offering to other dollar-pegged digital assets." Author Joshua Garcia, a partner at Ketsal, writes, "PayPal's stablecoin - called PYUSD - maintains its peg to the U.S. dollar with a reserve made up of 'secure and highly liquid assets [including] dollar deposits, U.S. treasuries, and cash equivalents,' according to PayPal's website. Incidentally, Tether and USDC maintain their peg to the U.S. dollar using a mechanism similar to PYUSD's. Tether's website states, 'all Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether's reserves.' These reserves, according to Tether's independent auditor, are mostly made up of U.S. treasury bills - $56.6 billion of them - not cash. The list of reserve assets includes, surprisingly, less than $1 billion of cash and bank deposits. The parties managing Tether's reserves lean heavily into overnight and term reverse repurchase agreements (about $8.8 billion), money market funds (about $8.2 billion), and secured loans (about $5.1 billion). Ironically, $1.6 billion of bitcoins are part of Tether's reserve assets, along with several billions in precious metals and a broad category of 'other investments.'" Forbes continues, "Circle has a similar, but less diverse, makeup of reserve assets. The company holds its reserves in cash, short-dated U.S. Treasuries, and overnight U.S. Treasury repurchase agreements. Some of these funds are held in Circle Reserve Fund, an SEC-registered government money market fund, which manages over $23 billion of reserve-backing assets." They add, "As the SEC's enforcement arm searches for an angle to regulate stablecoin issuers by enforcement, it will certainly latch onto the crucial role of centralized parties who manage the underlying reserve pools of U.S. Treasuries. Without those pools, and without the centralized management of those reserves, the SEC might argue, retail buyers may not have faith enough to believe 1 Tether, or 1 USDC, or 1 PYUSD, will equal $1 in perpetuity. Stablecoin issuers cannot ignore this centralization risk. Fortunately for PayPal, it is not a stablecoin issuer. Its stablecoin terms clearly draw the line between PayPal and the actual issuer: 'PYUSD is issued by Paxos, not PayPal.' In addition, Paxos - not PayPal - 'is obligated to buy and sell PYUSD to and from PayPal at a stable price of $1.00 U.S. dollar per PYUSD token.' PYUSD is, in reality, a Paxos stablecoin marketed as a PayPal one."

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