On April 25, 2025, the Securities and Exchange Commission (SEC) dropped its investigation into PayPal's stablecoin without issuing an enforcement action. This is the latest in a string of decisions by federal regulators to dismiss or resolve investigations into cryptocurrency companies. Under the Trump Administration, the SEC has dismissed lawsuits against Kraken, Conensys and Cumberland DRW, and resolved cases against Coinbase and Ripple Labs. OpenSea, Gemini, and Robinhood also disclosed that the SEC dropped investigations that were headed toward litigation. In April of this year, the Department of Justice closed the National Cryptocurrency Enforcement Team.
These actions signal a strategic shift by the Trump administration, one that de-emphasizes the regulation of the crypto industry championed by former SEC Chairman Gary Gensler. Reducing regulations can spur innovation within the industry, allowing companies to enter the marketplace with new solutions. Many feel that by removing regulatory burdens, economic growth will follow suit.
However, deregulation comes with its own set of risks, including the potential for fraud. With reduced oversight and fewer prying eyes, unethical behavior can flourish. Some point to the repeal of the Glass Steagall Act as a contributing factor to the rise of banks that were "too big to fail," a key element of the 2008 financial crisis. The Enron accounting scandal, which exposed massive corporate fraud, led to the Sarbanes-Oxley Act of 2002. While deregulation can foster innovation and growth, it can also open the door to abuse—often making regulation a necessary reaction to prevent or respond to misconduct.
These risks are particularly pronounced for the crypto industry. The relative anonymity of digital currency is appealing to criminals looking to launder their illicit proceeds. The volatility of the crypto market can attract individuals seeking to illegally manipulate it. And many of the crypto firms are headquartered in high-privacy jurisdictions with limited oversight, reducing transparency and impeding efforts to detect or prevent fraud. This combination has, in part, driven several high-profile prosecutions and bankruptcies, including FTX and Binance.
Thus, there is a likelihood that some crypto firms will prove to be less than what they represent themselves to be. Without meaningful oversight, efforts to deregulate the crypto industry may create a breeding ground for tomorrow’s financial scandals.
The dismissal of the PayPal investigation joins a growing list of crypto-focused enforcement matters discarded by Trump's SEC.
