PayPal puts Stablecoin on hold

PayPal is reportedly halting its stablecoin project amid increased scrutiny of the cryptocurrency industry.

The payments company had wanted to unveil the stablecoin in the coming weeks, Bloomberg News reported on Friday (February 10), citing a source familiar with the matter.

A spokesperson for the company told Bloomberg that PayPal is “exploring a stable coin” and that if it moves forward, “of course we will work closely with relevant regulators.”

PYMNTS has reached out to PayPal for comment, but has yet to receive a response.

Bloomberg notes that the pause coincided with the news that PayPal’s partner on the stablecoin project, Paxos Trust, was under investigation by the New York State Department of Financial Services (NYDFS).

As PYMNTS reported, news of the investigation came two days after Paxos took to Twitter to address “speculation” surrounding its relationship with the US Office of the Comptroller of the Currency (OCC).

“To clarify speculation: Paxos has not been asked to withdraw its application for a national trust bank charter by the OCC, nor has it been denied the charter,” the firm said. “Paxos continues to work constructively with the OCC.”

PayPal’s apparent decision to put its stablecoin on hold comes as the crypto sector faces a number of obstacles in the wake of last year’s FTX collapse, as PYMNTS wrote recently, including “brute-force regulatory pressure in the US, increasingly disinterested retail investors,” and “a potentially unbanked future.”

Add to all this the Securities and Exchange Commission’s (SEC) $30 million settlement with US-based crypto exchange Kraken over its betting product, which many observers consider to be the biggest recent development in the crypto sector.

The SEC claimed that Kraken’s staking service was an illegal sale of securities and that its crypto staking products violated the rules. Kraken did not admit wrongdoing, but agreed to pay a $30 million fine and end its products in the U.S.

“Whether through stake-as-a-service, lending or other means, crypto intermediaries must provide the proper disclosures and safeguards required by our laws.” SEC Chairman Gary Gensler said.

As PYMNTS noted, major crypto exchanges such as Coinbase and Binance themselves have begun offering crypto-staking products to diversify their revenue. Coinbase is the second largest depositor of hedged ether, and saw its shares fall the most in more than half a year after the settlement.