At the time, a Paypal executive said that if the company were to move forward, it would work closely with financial regulators. However, on Feb. 10, a source said Paypal had put the concept on hold for now, due to regulatory scrutiny of the crypto industry.
Paypal pauses Stablecoin development due to regulatory concerns
On January 7, 2023, it was reported that Paypal was exploring the creation of stablecoin. “We are exploring a stablecoin“, a Paypal executive told reporters at the time. “If and when we look to move forward, we will, of course, work closely with the relevant regulators.“The multinational financial technology company, founded in December 1998, is one of the world’s largest online payment systems.
However, Paypal appears to have slowed its plans to develop a stablecoin, according to a Bloomberg article citing a person with knowledge of the matter. Paypal was also working with Paxos, the stablecoin issuer that is reportedly under investigation by the New York State Department of Financial Services (NYDFS), according to Coindesk.
Paxos runs two stablecoin projects, a tokenized gold coin, and holds a Bitlicense issued by the NYDFS. Crypto-currency companies have been the subject of a major crackdown following the FTX collapse. Recently, crypto-currency lender Nexo agreed to settle with the U.S. Securities and Exchange Commission (SEC) and several state regulators over its earnings product. Nexo paid the regulators $45 million on a “no admission, no denial” and terminated the program in the United States.
More recently, Kraken was fined $30 million for its staking service program and was forced to stop offering the service to U.S. retail customers. Kraken said it would continue to offer its staking services to customers outside the United States. Founder Jesse Powell is calling on Congress to issue clear regulatory guidelines and protect retail investors from using offshore services.
Bloomberg’s Yueqi Yang and Jennifer Surane did not reveal the specific reason for Paypal’s decision to pause its stablecoin plans. The payments giant recently entered the crypto-currency business by launching a wide range of crypto services in 2021. Paypal holds a Bitlicense issued by the NYDFS and converted its conditional Bitlicense to a full license in June 2022.