PayPal's Stablecoin Platform Raises Regulatory Questions
On September 9, PayPal's new platform PYUSDx went live in partnership with M0 and MoonPay. The platform allows any business to issue its own branded stablecoin without having to handle reserves, custody, or redemption infrastructure.
The three issuers who launched on the platform are Saturn, Concrete, and Cap, which together processed over $100 million in volume. Cap migrated a portion of its cUSD onto PYUSDx to reduce its reliance on volatile decentralized finance liquidity.
However, the structure of the platform raises questions about compliance with the GENIUS Act, which restricts the issuance of payment stablecoins and requires reserves to be backed by high-quality liquid assets. PYUSDx tokens are issued by MoonPay Digital Assets Limited, but their reserve asset is another token, PYUSD.
This creates a two-layer system, where the issuer (MoonPay) holds the backing asset (PYUSD), which in turn is backed by Paxos-issued PYUSD that sits on top of dollar deposits and Treasuries. This raises questions about who is the permitted issuer and whether PYUSD counts as a permitted reserve asset.
The GENIUS Act does not address stablecoins backed by other stablecoins, leaving regulatory uncertainty around this structure.