PYUSD: PayPal’s New Stablecoin and Its Potential Impact

PYUSD: PayPal’s New Stablecoin and Its Potential Impact

After PayPal’s recent introduction of PYUSD, the market examines the prospective use cases and benefits of this new stablecoin, especially within the U.S., highlighting its potential utility within the existing financial framework.

PayPal, a leading global payments company, is making its debut in the crypto realm with a U.S. dollar-backed stablecoin named PayPal USD (PYUSD). The announcement came on August 7, 2023.

What is PYUSD?

According to PayPal’s official statement, this new crypto called PYUSD is 100% backed by USD: 

“PayPal USD is designed to contribute to the opportunity stablecoins offer for payments and is 100% backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents. PayPal USD is redeemable 1:1 for U.S. dollars and is issued by Paxos Trust Company. “

The PYUSD stablecoin, built on the Ethereum platform, will soon roll out to American PayPal customers. 

This is the first instance of a premier financial service launching its own stablecoin. 

With PYUSD, users have the option to transfer between PayPal and approved external crypto wallets, employ the coin for various transactions, or exchange it with other cryptocurrencies supported on PayPal, like bitcoin (BTC) and ether (ETH).

PayPal emphasized that their stablecoin is poised for adoption by an expansive and evolving network of external developers, digital wallets, and web3 platforms and is also primed for easy integration by crypto trading platforms.

Paxos Trust, a crypto financial services firm located in New York, will oversee the issuance of PYUSD. 

The coin is underpinned by U.S. dollar reserves, short-term government securities, and other cash-like assets. Moreover, users can redeem it for U.S. dollars or trade it for other digital currencies available on PayPal’s platform.

At the time of the launch, PayPal’s CEO Dan Schulman remarked, “Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

It is expected that PYUSD to be available later on the Venmo app as well. 

How will the PYUSD be monitored?


PayPal’s PYUSD stablecoin reserves will be monitored and verified through a multi-step process to ensure transparency and trustworthiness:

Monthly Reserve Report

Starting from September 2023, Paxos, the firm in charge of issuing PYUSD, will release a public monthly Reserve Report for PayPal USD. This report will detail the specific assets that make up the reserves backing the stablecoin.

Third-party Attestation

In addition to the monthly report, Paxos will also release a public third-party attestation on the value of the PayPal USD reserve assets. This is to double-check and confirm the validity of the reserves.

Independent Accounting Firm

The attestation process will be carried out by an external, independent accounting firm. This ensures that there’s no conflict of interest and that the process is free from potential biases.

Adherence to Established Standards

The attestation will comply with standards set by the American Institute of Certified Public Accountants (AICPA). This means the audit will follow rigorous professional guidelines, ensuring the accuracy and reliability of the information.

PYUSD is a stable issued by a regulated company  

PYUSD, launched by fintech leader PayPal, is distinct from other stablecoins due to its robust regulatory framework. PayPal’s PYUSD stands out in the stablecoin landscape due to its unique position of being backed by a trust company that is stringently regulated by the NYDFS.

This sets it apart from major stablecoins like USDT and USDC. 

Here’s how PYUSD is regulated:

Issued by a regulated entity

Paxos Trust, the company behind the issuance of PYUSD, operates as a trust company. This status subjects them to direct oversight by a regulatory authority.

Regulatory oversight by NYDFS

Paxos is regulated by the New York Department of Financial Services (NYDFS). This means that the entire process of issuing PYUSD, including the management of its reserves, is under the constant supervision of NYDFS.

Protection by regulator

Walter Hessert, the head of strategy at Paxos Trust, highlighted the importance of having a prudential regulator. With such oversight, every activity linked to PYUSD’s issuance is monitored. For token holders, regardless of their location worldwide, this ensures that they benefit from the protection and guidelines established by New York’s regulatory framework.

Bankruptcy safeguard

One of the significant rules established by the NYDFS concerning PYUSD is the protection against bankruptcy risk. Should Paxos face bankruptcy, the assets of PYUSD token holders are safeguarded. The NYDFS would intervene, ensuring that PYUSD is excluded from the bankruptcy process. Consequently, token holders would not become involuntary creditors during a bankruptcy, and their funds would be promptly returned.

Clear differentiation from other stablecoins

Both USDT (issued by Tether) and USDC (jointly issued by Circle and Coinbase) dominate the stablecoin market. However, as Hessert pointed out, both these coins are unregulated, albeit transparent in their operations. In contrast, PYUSD’s regulatory structure offers an additional layer of security and trust for its users.

Why did PayPal decide to issue a stablecoin?

PayPal’s decision to issue the PYUSD stablecoin is emblematic of its substantial influence and strategic positioning in the financial sector. 

While there’s undeniable regulatory uncertainty surrounding cryptocurrencies in the U.S., PayPal’s stature enables it to not only navigate but also potentially influence these regulatory decisions. 

Companies like Coinbase and Circle may have paved the way in the crypto regulation space, but major entities like PayPal are sending a clear message: they can effectively handle and even counteract regulatory pressures.

At its core, PayPal’s move is driven by the prospect of profitability. The issuance of PYUSD isn’t a minor endeavor, requiring collaboration across several of PayPal’s departments, from compliance to communications. 

However, this decision wasn’t born out of altruism. Instead, it’s a calculated business move, made in response to a rapidly evolving digital financial landscape, reinforcing PayPal’s dominant position and highlighting its confidence in seizing new lucrative opportunities.

What’s the use case for PYUSD?

The use case for PYUSD appears to be in its infancy, and its exact utility for the average consumer remains somewhat ambiguous. 

Introduced via Venmo, PYUSD essentially provides another avenue for banked Americans to transact using a digital representation of the U.S. dollar, aligning with how most PayPal products have functioned since the company’s inception. 

However, one distinct feature is that PYUSD can potentially be sent outside of PayPal’s proprietary ecosystem using the Ethereum network. 

This capability hints at a use case where individuals barred from Venmo or PayPal could potentially transfer their funds via an Ethereum-based PYUSD withdrawal. 

Yet, this use case might be limited, given the centralized nature of the stablecoin. 

In essence, while the stablecoin could offer a mechanism to navigate around restrictive banking scenarios, its primary use cases might lean more towards backend financial operations that institutions can leverage, rather than direct consumer applications.

The Perilous Intersection of CBDCs and Government Oversight

The Perilous Intersection of CBDCs and Government Oversight

NYU law professors Richard Epstein and Max Raskin published a paper to explain the potential hazards of central bank digital currencies, highlighting the risk of overstepping governmental boundaries and the importance of maintaining the ‘separation of money and state’.


Central banks worldwide are swiftly progressing with their explorations in creating digital currencies. 

Numerous examples, such as the recent announcement of a successful prototype by the New York Federal Reserve or the Bank of England’s achievement in the subsequent phase of its digital pound trial, indicate that over 130 nations globally are considering the idea of central bank digital currencies (CBDCs).

The reasoning behind this is twofold. 

Firstly, central banks can position themselves as protectors of consumers and innovators in cost-saving technologies by eliminating the role of private banking intermediaries

Secondly, they can acquire an additional mechanism for policymaking.

However, the proposition of excluding these intermediaries raises an important question of who would be responsible for the other end of the financial transactions. 

The inevitable answer is a far-reaching and intrusive government capable of monitoring every single expenditure.

Digital cash? 

Max Raskin, an adjunct professor of law at New York University and a fellow at the school’s Institute for Judicial Administration, and Richard Epstein, a law professor at New York University, a senior fellow at the Hoover Institution, and a senior lecturer at the University of Chicago, are exploring this topic in a paper called “A Wall of Separation Between Money and State: Policy and Philosophy for the Era of Cryptocurrency,“ published in The Brown Journal of World Affairs.

Their argument suggests that a central bank, for instance, the Bank of England, would issue a “digital pound,” which would be a direct claim on the central bank, much like current cash is. 

This process would involve creating the necessary infrastructure for individuals to store digital pounds in digital wallets and facilitate interactions with retailers and other users.

Contrasting current practices where central banks such as the Federal Reserve and the Bank of England do not offer accounts to direct depositors, the proposed model would eliminate the costly private banking system that presently stands between the central bank and the accounts held by businesses and individuals.

At a glance, it seems that CBDCs might cut unnecessary costs

However, these apparent efficiency benefits can be deceptive and hazardous. 

Intermediaries function in thousands of markets, with representatives, aggregators, and monitors in almost every significant business line. These participants can’t be easily deemed obsolete.

Intermediaries often provide value as they are motivated to offer more than the bare minimum to stand out – such as new banking products and services. 

The variety of services banks can offer due to competitive pressures that ultimately benefit consumers. Restricting these forces can hamper the market economy.

CBDC implementation can be risky

The implementation of CBDCs is not without risks. 

The idea of providing extensive power and confidential information to a faceless government entity can be alarming. The system can use that data against you in numerous ways. 

By removing the private banking intermediaries, CBDCs would eliminate a crucial barrier that currently safeguards individuals and firms from government intrusion and overstepping.

The use of cash and bearer instruments is currently untraceable by the central government. 

However, the use of digital cash would be. 

It’s clear that even those who decide to stick with private bankers will still be scrutinised by the state, which holds control over all transactions.

Moreover, these digital funds would empower central banks to direct personal loans and mortgages to specific private parties with minor competition, raising concerns around state industrial policies. It’s not hard to imagine potential nightmare scenarios, yet they are difficult to avert.

The question remains: can we trust thousands of new banker-bureaucrats to perform any better?

Can we trust banks?

The Bank of England, in its digital pound argument, emphasised the British government’s commitment to fighting climate change, stating that the digital pound would be designed with this objective in mind.

Why should a topic as intricate and contentious as climate change be regulated through the financial system?

Similarly, U.S. financial regulators have started to wade into political issues like climate change.

If such explicit political objectives are considered, it is not a stretch to imagine a government-run bank using its powers to favour certain energy producers and punish others through their bank accounts. 

The power to impact credits and debits must be a feature of the central banks’ proposed code, which introduces a covert system of industrial policy.

If CBDCs become a reality, officially favoured energy sources like solar and wind power could witness their bank accounts receiving subsidies without the need to attract private investors or undergo the scrutiny of the private banking system. 

Bank accounts could become vulnerable to political manipulations, bureaucracies, or even disenfranchisement overnight with limited recourse.

Furthermore, these CBDC initiatives in the U.S. were originally proposed in the context of directly providing pandemic stimulus to the economy. However, the evidence is overwhelming that this hasty system of government payments was incredibly wasteful.

Moreover, central banks could implement countercyclical monetary policies, such as providing cash boosts to individuals in specific regions or sectors, which again becomes a political football.

Money and new technologies

We should undoubtedly strive to leverage new technologies, but only when implemented correctly. According to the paper in the Brown Journal of World Affairs, “Money should be a neutral unit of measurement, like inches or kilograms.”

This concept, referred to as the “separation of money and state,” aims to stabilise all currencies over time, minimising the need for private parties to design complex and costly mechanisms like adjustable-rate mortgages to handle financial instability.

For instance, Bitcoin has a predetermined supply of no more than 21 million units, not governed by any individual institution but rather by the network’s consensus mechanism. 

This feature provides a robust defence against value dilution that no government-centric system could hope to match.

This fixed system could offer additional institutional support for developing countries seeking modernisation. 

Countries with a history of mismanaging their monetary systems could benefit from the discipline that comes with certain forms of digital currency. 

For instance, a central bank like Zimbabwe‘s or Argentina’s, plagued with mismanagement, could adopt an innovative form of dollarisation using Bitcoin or another form of programmed cryptocurrency.

Ripple vs SEC: XRP Declared Not a Security

Ripple vs SEC: XRP Declared Not a Security

In a groundbreaking development, a judge ruled that XRP is not considered a security in the Securities and Exchange Commission’s (SEC) case against Ripple. This ruling has significant implications for the future of XRP and the broader crypto industry.

On July 13, 2023, Ripple Labs won against the SEC, and XRP was declared to not be a security. 

The company achieved a notable win in the United States District Court in the Southern District of New York when Judge Analisa Torres issued a partial ruling in favor of the company. This ruling pertained to a case brought against Ripple by the Securities and Exchange Commission (SEC) that dates back to 2020.

It’s official, Ripple’s token (XRP)is not a security

Based on documents filed on July 13th, Judge Torres granted summary judgment in favor of Ripple Labs. 

The ruling clarified that the XRP token should not be considered a security, specifically in relation to its programmatic sales on digital asset exchanges. 

However, the SEC also secured a victory of its own as the federal judge determined that XRP qualified as a security when sold to institutional investors. This classification was based on the conditions outlined in the Howey Test.

The SEC’s lawsuit aimed to compel Ripple to cease offering its XRP token, arguing that it qualified as a security and, therefore, required additional regulatory measures.

According to court documents, the motion for summary judgment by the defendants has been granted for Programmatic Sales, Other Distributions, and the sales made by Larsen and Garlinghouse. However, it has been denied for Institutional Sales.

This means that the XRP token is not considered a security when sold through retail digital asset exchanges.

After this news broke, the price of XRP surged from $0.45 to $0.61 within a few minutes. 

The legal case against Ripple began in December 2020 when the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple and its two top executives, Brad Garlinghouse and Chris Larsen. 

The SEC alleged that the company was offering an unregistered security.

Throughout the past three years, the case has been filled with dramatic twists, including the release of the “Hinman Documents” and Garlinghouse’s ongoing defiance in response to the SEC’s accusations.

In addition to the noticeable price movement of the XRP token following this news, the general sentiment within the cryptocurrency community seems to be one of celebration and joy.

XRP’s non-security status

Ripple CEO Brad Garlinghouse is confident that the United States Securities and Exchange Commission (SEC) will face a lengthy process before being able to appeal the recent ruling in its case against Ripple Labs.

During an interview with Bloomberg on July 15, Garlinghouse downplayed the significance of the ruling regarding institutional sales, referring to it as “the smallest piece” of the overall lawsuit. He expressed his belief that if the SEC were to appeal the ruling on retail sales, it would only serve to reinforce Judge Torres’ decision.

Despite acknowledging that it may take a considerable amount of time before the SEC can file an appeal, Garlinghouse firmly stated his belief in the current legal status of XRP: “Based on the current law of the land, XRP is not classified as a security. Given the lengthy process required for the SEC to file an appeal, which could take years, we maintain a high level of optimism.”

Garlinghouse emphasized that this marks the first instance where the SEC has faced a setback in a “crypto case.” He openly criticized the SEC, referring to them as “bullies” who target players in the crypto industry unable to mount a strong defense.

He highlighted the initial response of various U.S. crypto exchanges when the lawsuit against Ripple was initially filed. 

Many took a cautious approach, waiting to observe the outcome due to the uncertainty surrounding the case. Consequently, exchanges such as Coinbase and Kraken decided to delist XRP entirely.

Garlinghouse accused the SEC of deliberately creating confusion in the market. He claimed that the SEC was aware of the existing confusion and intentionally engaged in actions that further exacerbated the situation.

According to Garlinghouse, this deliberate confusion was a means for the SEC to exert its power, hindering innovation within the United States. He criticized the SEC for prioritizing power and politics over the establishment of clear regulatory frameworks, resulting in difficulties for entrepreneurs and investors seeking to participate in the U.S. crypto market and blockchain industry.

BlackRock, Bitcoin ETFs and the Future: Balancing Growth with Core Values

BlackRock, Bitcoin ETFs and the Future: Balancing Growth with Core Values

BlackRock Bitcoin ETF seeks SEC approval. Are Bitcoin ETFs the way to mass adoption? Or is traditional finance trying to profit from this new asset?

Bitcoin fans got excited when the news that BlackRock is applying for a Bitcoin-based fund got out. They think it could mean a big change in how the government regulates these things. They also believe it could make Bitcoin more accessible to everyone.

While there might be some truth to these ideas, we should take a step back and see the bigger picture. It’s not good that the simple chance of a Bitcoin-based fund being approved in the US can send the market crazy. The fact that BlackRock could have such a big effect on the price of Bitcoin should make us all think, not celebrate.

A Bitcoin-based fund would be an easy way for US retirement funds to benefit from Bitcoin’s potential growth. It’s also likely that if such a fund is approved in the US, it could lead to a big increase in Bitcoin’s price in the following years. But what about Bitcoin’s main goal – to become an alternative to the traditional financial system?

A Bitcoin-based fund wouldn’t do much to help with these things.

The BlackRock Bitcoin ETF

Recently, there’s been a lot of focus on applications for Bitcoin-based funds. Following BlackRock, a company that manages $10 trillion worth of assets, other firms like Fidelity, Invesco, Wisdom Tree, and Valkyrie have also applied for approval from the SEC.

If the SEC ends up approving the applications from big players like JPMorgan, Morgan Stanley, Goldman Sachs, BNY Mellon, and Bank of America who want to offer similar services, the digital currency market could open up to firms managing a total of $27 trillion in assets. As we wait for a decision on Grayscale’s application, GBTC, its Bitcoin trust, has seen its price increase by over 134% in 2023, reaching $19.47. 

However, the United States may see a delay in the introduction of a Bitcoin exchange-traded fund (ETF) as the SEC has labeled recent applications by investment managers as insufficient. 

According to The Wall Street Journal, the SEC found the filings by the Nasdaq and Chicago Board Options Exchange unclear and incomplete. The SEC expected them to specify a “surveillance-sharing agreement” with a Bitcoin exchange or provide enough details about these arrangements.

BlackRock’s Bitcoin ETF application included a “surveillance sharing agreement” to avoid market manipulation, leading others like ARK Invest and 21Shares to modify their applications similarly. 

Other companies like Invesco, WisdomTree, Valkyrie, and Fidelity have also refiled or amended their applications. Notably, ARK Invest is considered a front-runner in this process.

Bitcoin ETFs have been continuously rejected by the SEC since 2017. However, such financial products are already available in Canada, with funds like Purpose Bitcoin, 3iQ CoinShares, and CI Galaxy Bitcoin directly investing in Bitcoin.

BlackRock ETF’s application re-submitted 

Nasdaq has resubmitted its application to list BlackRock’s proposed Bitcoin ETF, and has named Coinbase as the exchange to be monitored under a surveillance-sharing agreement. 

This move follows feedback from U.S. regulators and aims to prevent market manipulation. 

Other applications, including one from Fidelity, have also been updated to name Coinbase as the surveillance partner.

The Nasdaq reached an agreement with Coinbase on June 8, according to the new filing. The filing also indicates that Coinbase accounted for about 56% of the dollar-to-Bitcoin trading on U.S.-based platforms so far this year.

The SEC has historically rejected attempts to launch a Bitcoin spot ETF, but money managers are still trying. The news has positively affected Coinbase shares.

Traditional finance wants to take its share of crypto trading

The application from BlackRock and all the talk around it have really highlighted the mistrust that some people in the crypto world have toward traditional finance.

The timing of BlackRock’s move into Bitcoin funds is pretty interesting and has set off a bunch of conspiracy theories. Since the US Securities and Exchange Commission (SEC) has taken legal action against Binance and Coinbase, some think the government is trying to push aside crypto-focused companies to make way for traditional firms like BlackRock to lead in the crypto industry.

Whatever the reason is, the risk right now is that Bitcoin will turn into another type of investment. 

Looking more closely at BlackRock’s application, more warning signs start to appear. The application includes a clause stating that in case of a major change or ‘hard fork’ in Bitcoin, BlackRock can decide which version of Bitcoin the fund should use. This could be a big deal because it means BlackRock could have a say in Bitcoin’s future or at least guide where big businesses and the general public put their money.

Having such a strong influence over what’s supposed to be a decentralized money system is obviously a problem. But, there’s another issue with these funds. Investors don’t actually get to own the Bitcoin their investment is based on. And owning Bitcoin is where the real benefits are.

Conflicting interests in Bitcoin-based funds

Bitcoin was created as a direct reaction to the financial aid and money-printing that happened after the 2008 financial crisis. Unlike regular money, there’s only a limited amount of Bitcoin. It’s truly rare and managed in a decentralized way.

Fifteen years after the crisis, central banks all over the world are still printing money as if it’s a free pass. 

But it’s anything but free. Regular, hardworking people all over the world pay the price as the value of their money goes down, a problem that’s getting worse due to high, lasting inflation.

While central banks take risky gambles with public money, Bitcoin’s aim is to give power to individuals by providing a type of money that can’t be censored and works everywhere. As an open-source money network, Bitcoin has the potential to change the way we use money. It could even make centralized institutions much less important or not needed at all – something traditional finance likely knows all too well.

Bitcoin-based funds seem to go against this empowering philosophy. 

El Salvador, with its revolutionary approach to adopting Bitcoin, arguably aligns more with Bitcoin’s main goals than any fund ever could. 

While El Salvador is working to give power to people without banks by actively promoting Bitcoin ownership, investors in Bitcoin-based funds won’t get any of the benefits of Bitcoin

Instead, they’ll fill the pockets of – and strengthen the position of – traditional finance institutions.

Potential risks of Bitcoin-based funds

Bitcoin-based funds are likely to become more common in the crypto world and appeal to a certain type of investor in the coming years. But their role shouldn’t distract us from Bitcoin’s long-term future. 

If we only focus on letting people benefit from price changes without actually owning any Bitcoin, then we’ve completely missed the point of what could be a groundbreaking money system. 

And no, if a rule is ever suggested that forces regular people to invest only through funds and not by owning Bitcoin directly, that’s not “protecting consumers.” It’s taking power away from them.

We in the crypto industry should be cautious, recognizing that the growing involvement of funds and traditional finance in the crypto world could threaten Bitcoin’s core purpose. 

Being aware of these threats means not getting carried away by all the excitement but staying true to Bitcoin’s original goal – to change the world’s financial systems, not just to be an asset for gambling on price changes.

SEC Takes Legal Action Against Coinbase, Binance, and its Founder

SEC Takes Legal Action Against Coinbase, Binance, and its Founder

After recently suing Binance, the SEC now targets Coinbase for allegedly operating as an unregistered securities exchange, adding to regulatory scrutiny in the crypto industry.

The U.S. government’s finance watchdog, the Securities and Exchange Commission (SEC), is suing Coinbase. Coinbase is a big company in New York that trades cryptocurrencies like Bitcoin.

The SEC says that Coinbase should have registered as a broker, national securities exchange, or clearing agency, but they didn’t. 

This registration helps keep trading fair and transparent.

Also, the SEC claims that Coinbase has been selling certain cryptocurrencies that it shouldn’t have. These include Solana, Cardano, Polygon, Filecoin, The Sandbox, Axie Infinity, Chiliz, Flow, Internet Computer, Near, Voyager Token, Dash, and Nexo. According to the SEC, these count as securities, and you need special permission to sell them.

The lawsuit also says that Coinbase has been working like a broker for securities since 2019 without the needed registration. This is two years before they first started offering public shares in April 2021.

The SEC says that Coinbase’s staking program is also a problem. This program involves five different cryptocurrencies. According to the SEC, this makes the staking program an investment deal and counts as a security. Coinbase has been arguing with the SEC about this, saying its staking products are not securities. They keep arguing even though Kraken, another crypto company, settled with the SEC and stopped offering staking services in the U.S.

Gary Gensler, the head of the SEC, spoke about the lawsuit against Coinbase. He said Coinbase had not given its customers enough protection against scams and manipulation. They’ve also not been open about conflicts of interest. Gurbir Grewal, who is in charge of enforcing SEC rules, said that Coinbase knew they were breaking federal securities laws, but they did it anyway.

After the SEC announced its lawsuit on June 6, the price of Coinbase’s shares fell by 15% before trading started.

Coinbase share price 

SEC also sued Binance US

The SEC’s lawsuit against Coinbase happened just one day after they also sued Binance. Binance is another crypto company that the SEC accuses of breaking securities laws and mixing up customers’ money. Binance is in trouble for breaking 13 different securities laws. 

The U.S. Securities and Exchange Commission (SEC) has charged Binance, the world’s largest crypto exchange, and its founder, Changpeng Zhao. They’re accused of mixing up billions in user funds and sending them to a Zhao-controlled company in Europe.

The SEC says Zhao and Binance dodged their own rules to let rich U.S. investors keep trading on Binance’s unregulated international platform. It’s even claimed that an executive admitted the company acted as an unlicensed securities exchange in the U.S.

The lawsuit also suggests that Binance.US was created to protect Binance and Zhao from legal issues. Two former Binance.US CEOs, likely Catherine Coley and Brian Brooks, raised concerns about Zhao’s control over the company.

Between 2018 and 2021, Binance made $11.6 billion, mostly from transaction fees. The SEC claims that Binance knowingly had many U.S. customers and didn’t act, even though it’s against federal law to offer and sell unregistered securities. Binance’s compliance efforts in 2019 were mostly for show, according to the SEC.

Lastly, the SEC accuses Zhao of setting up a plan to help rich customers evade regulations using a VPN service to hide their location and fake compliance documents to cover their tracks.

Coinbase is a publicly traded company

But people in the crypto industry are confused about the lawsuit against Coinbase. This is mainly because Coinbase is a company that has publicly traded shares.

Binance’s boss, Changpeng Zhao, responded to the lawsuit against Coinbase by teasing the SEC.

Paul Grewal, the top lawyer at Coinbase, said that the SEC’s focus on punishing rather than setting clear rules for digital assets is bad for U.S. business. He said we need new laws that create fair and clear rules for everyone instead of lawsuits. But for now, Coinbase will keep doing business as usual.

“The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual.”

A lot of people in the crypto community are wondering how Coinbase could have gone public in 2021 if it was acting like an unregistered securities broker.

Beware Where You Store Your Money: Payment Apps May Lack Protection

Beware Where You Store Your Money: Payment Apps May Lack Protection

Payment apps may lack protection: A recent warning from the US Consumer Financial Protection Bureau emphasizes that the FDIC might not protect money stored in mobile payment apps. Customers could be concerned about whether their funds are insured, highlighting the risks associated with these platforms.

The US Consumer Financial Protection Bureau (CFPB) has advised Americans to keep their money in a secure, insured bank account rather than in an unprotected app. 

The Bureau expressed concern over the growing use of peer-to-peer payment apps, which also handle cryptocurrency transactions, due to the increased risk of losing money if things go wrong.

The public has become more aware of the protection offered by the Federal Deposit Insurance Corporation (FDIC). This comes after the failure of several cryptocurrency platforms and a banking crisis that resulted in the loss of a huge amount of customer money. 

Despite this, the CFPB warns that a lot of money is still being held in these payment apps, which aren’t covered by the FDIC.

Payment services don’t offer insurance for your funds

The CFPB says that many peer-to-peer apps like PayPal, Venmo, Cash App, Apple Pay, and Google Pay have features that work much like bank accounts, although Meta Pay doesn’t have that feature.

The companies behind these apps actually like it when you keep your money in their apps because they can then use your money for their own investments (within legal limits), while they hardly ever pay you any interest on the money you store. However, there is a risk involved for these companies, as they could potentially lose money on the investments they make.

The CFPB explains that if your money is in an FDIC-insured account and something goes wrong, whether you’re covered by their insurance is only decided after the fact. 

Plus, the insurance only covers the bank’s failure. It doesn’t cover the failure of the payment app, which is usually controlled by state laws and not watched over by the federal government. Most of the time, these state laws are meant for transferring money, not storing it.

So, if you have money in PayPal or Venmo, it could be protected by this pass-through insurance when it’s in their partner banks, but not if they’ve used your money for investments. Also, it might not be clear to you where your money is actually kept.

More and more, these mobile payment services are letting you handle cryptocurrencies. But remember, payment apps may lack protection and cryptocurrencies aren’t insured, even though services like PayPal and Venmo let you keep crypto in your accounts.

In October 2022, the EU published a report to describe the risks of crypto assets investments. 

According to the report. “The pseudonymity that prevails in crypto-asset markets makes it virtually impossible to assess the creditworthiness or aggregate exposures of participants.” The paper also talks about the leverage offered by crypto exchanges to individual investors, which can raise up to 125x. 

While some jurisdictions try to adopt regulations to protect investors (e.g., MiCA), these regulations often fall short in the face of the ever-expanding crypto industry. 

All in all, keeping your crypto investments is a very risky business, and you should be aware of the risks. 

Why aren’t crypto insurance policies good enough yet?

Insurance companies still need to improve their crypto insurance plans. Right now, these plans don’t cover everything. To fully protect all your crypto assets, you might have to combine different plans. One might cover the loss of your private key, another might cover errors in smart contracts, and you might need a third in case your wallet company goes under.

What are the risks of investing in cryptocurrencies?

Cryptocurrencies are pretty risky. Their prices can go up and down much more than things like stocks. Future prices could also be impacted by changes in laws, which might even make cryptocurrencies worthless. Plus, cryptocurrencies are always at risk from cyber threats like hacking and theft.

Are cryptocurrencies insured by the FDIC?

No, they’re not. The FDIC insures normal bank accounts up to $250,000, but it doesn’t protect cryptocurrencies at all. If you’re not from the US, you should check your country’s financial authority and see their conditions for insured investments and their limitations. 

Can I get insurance for my cryptocurrency investments?

Yes, you can get insurance that offers limited protection against cryptocurrency theft. But these policies often only cover specific situations. They generally don’t protect you against losses due to market changes, hardware damage or loss, sending cryptocurrency to someone else, or problems with the blockchain technology that supports the asset. If you want more comprehensive coverage, you’ll probably need to buy multiple policies.