PayPal Halts Stablecoin Issuance Amid Crytpo Regulatory Violations

PayPal CEO Dan Schulman announced his plans to retire at the end of 2023. Jordan Vonderhaar—Bloomberg/Getty Images

Digital payments giant PayPal is reportedly halting work on its stablecoin following news that its partner in the effort is under investigation by a New York regulatory agency.

PayPal, which just published its fourth-quarter 2022 earnings on Thursday, was set to debut its stablecoin in the coming weeks but will no longer carry out the release, Bloomberg reported. The payment provider’s decision comes after Paxos, a stablecoin developer that has previously partnered with Binance and Mastercard, was reported on Thursday by CoinDesk to be in the crosshairs of the New York Department of Financial Services, a niche branch of state government and a key player among US cryptocurrency regulators. The reasons for the investigation were unclear.

Asked for comment, a spokesperson for PayPay said Fortune that the company was “exploring a stablecoin.”

“If and when we do try to move forward, we will of course work closely with relevant regulators,” the spokesperson said.

A spokesperson for Paxos did not immediately respond Fortune’s request for comment. A spokesperson for the Department of Financial Services declined to comment on ongoing investigations.

A pause in PayPal’s stablecoin development follows a series of recent regulatory actions against crypto companies. That acceleration caused it to hold back from pursuing its own coin, according to an anonymous source who spoke to Bloomberg.

On Thursday, the Securities and Exchange Commission announced that Kraken, the third-largest cryptocurrency exchange by trading volume, agreed to a $30 million fine after the government accused the exchange of selling unregistered securities through its staking business, which allows users to escrow their cryptocurrency. to help validate blockchain transactions. In exchange, token holders receive a certain percentage return. As part of the settlement, Kraken also agreed to remove the betting function from the platform in the US

And in late January, Custodia, a crypto-focused bank in Wyoming, was denied membership in the Federal Reserve System, which would have allowed the bank to take advantage of tax benefits, investment opportunities and other conveniences.

PayPal has made a concerted push into crypto over the past two years, allowing users to buy Bitcoin, Ethereum, Bitcoin Cash and Litecoin through its digital wallet. In January 2022, it announced its plans to explore the development of its own stablecoin. This was before crypto behemoths like Celsius, Voyager and most notoriously FTX collapsed and went bankrupt in the following months.

On Thursday, PayPal CEO Dan Schulman, who led the company as it began to expand into crypto, announced his plans to step down at the end of 2023.