PayPal suspends work on its stablecoin as regulators step up crypto scrutiny
Based on reports from various news outlets, PayPal has apparently decided to cancel the launch of its stablecoin that was expected to be unveiled in the coming weeks, despite releasing its financial results for the fourth quarter of 2022 on Thursday.
Back in August 2022, PayPal and stablecoin issuer Paxos Trust stated that they were developing cryptocurrency products.
Since 2020, New York-based Paxos has maintained a cryptocurrency agreement with PayPal, although it has had problems with the New York Department of Financial Services.
Regulators Go After PayPal Crypto Partner, Paxos
According to reports, the NYDFS is investigating Paxos, although the breadth of the investigation has not been fully disclosed in detail.
As this evolved, the US Office of the Comptroller of the Currency continues to aim to protect consumers from potential crypto market-related dangers.
The OCC is reportedly in constant contact with regulated firms to understand the vulnerabilities and liabilities consumers may face due to the volatility of the cryptocurrency market.
Image: CoolWallet
Paxos’ stablecoins include Pax dollar (USDP) and Binance USD (BUSD), a stablecoin delivered through a white-label company with the Binance trademark.
Paxos emphasizes its dedication to consumer protection on its website and states that assets for both stablecoins it generates are held in cash and US Treasuries.
In an email, a PayPal representative said:
“We are exploring a stablecoin; if and when we try to move forward, we will of course work closely with relevant regulators.”
The popularity and use cases of Stablecoins
Stablecoins are digital currencies designed to hold a consistent value relative to another asset, often a fiat currency such as the dollar or euro.
In recent years, they have grown in popularity due to their ability to combine the advantages of cryptocurrencies, such as fast and inexpensive cross-border transactions, with the stability of traditional fiat currencies.
Image: Investopedia
This makes them an attractive alternative to volatile cryptocurrencies such as Bitcoin and Ethereum.
In the fast-growing world of cryptocurrencies, the growing popularity of stablecoins has been fueled by the demand for a more stable and reliable method of transactions.
Meanwhile, the recent failure of several of the cryptocurrency market’s top players, most notably FTX, has dented investor confidence in what was once considered the next big thing in finance.
A halt in the creation of PayPal’s stablecoin follows a series of recent regulatory actions against crypto businesses. According to an unidentified source who spoke to Bloomberg, the move forced the payments company to end its pursuit of its own coin.
Crypto total market cap at $966 billion on the weekend chart | Chart: TradingView.com
Over the past two years, PayPal has made a serious foray into cryptocurrency, allowing users to purchase Bitcoin, Ethereum, Bitcoin Cash, and Litecoin using its digital wallet.
Last January, PayPal announced its intention to study the creation of its own stablecoin. This was long before crypto giants like Celsius, Voyager and most notoriously FTX went insolvent and crumbled in the following months.
– Featured image from Small Business Trends
