In light of the increased scrutiny from regulators, PayPal has decided to abandon its stablecoin project. Presenting its financial statistics for the fourth quarter of 2022 on Thursday, PayPal has opted to cancel the launch of its stablecoin, which was scheduled for the next weeks.
Paxos Trust, a stablecoin issuer, and PayPal, a global payments company, announced plans to create new cryptocurrency products in August 2022.
Paxos, a New York-based company, has had a cryptocurrency deal with PayPal since 2020 despite running into issues with the New York Department of Financial Services.
PayPal's Crypto Partner Paxos Being Targeted by Regulators
It has been reported that Paxos is under investigation by the NYDFS, albeit the scope of the probe has yet to be made public.
The U.S. Office of the Comptroller of Currency has been working to protect consumers from risks associated with the cryptocurrency market as this situation has evolved.
There have been rumors that the OCC is in frequent touch with regulated enterprises to learn about the vulnerabilities and liabilities that customers may suffer as a result of the instability of the bitcoin market.
The Binance USD (BUSD) is another stablecoin issued by Paxos, although it is issued under the Binance brand.
Paxos asserts on its website that all assets for stablecoins it creates are held in cash and U.S. Treasuries, emphasizing the company's commitment to customer safety.
A PayPal spokesperson explained the company's position in an email:
We are investigating the feasibility of a stablecoin and will, of course, coordinate closely with the appropriate authorities if and when we decide to pursue this option.
The Rise In Recognition And Various Applications Of Stablecoins
Stablecoins are virtual money designed to maintain a stable value about another income stream, often a fiat currency such as the U.S. dollar or the Euro.
Popularity has risen for them in recent years because they mix the security of traditional fiat currencies with the convenience of cryptocurrencies, such as fast and cheap international transactions.
This makes them a more stable option than Bitcoin and Ethereum, which are subject to wild price swings.
The need for a more secure and consistent means of exchange has contributed to the rise of stablecoins in the rapidly growing cryptocurrency market.
Meanwhile, investor confidence in what was once seen as the next big thing in finance has been weakened by the recent collapse of some of the market's key participants, most notably FTX.
PayPal has halted the development of its stablecoin in response to a wave of new regulations targeting the cryptocurrency industry.
An anonymous source told Bloomberg that the move caused the payments business to abandon the development of its cryptocurrency.
In the past two years, PayPal has made a significant push into the cryptocurrency market, allowing customers to use its digital wallet to buy Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
In January of last year, PayPal stated that the company would look at developing its stablecoin. This event occurred before the subsequent months saw the demise of crypto industry titans like Celsius, Voyager, and, most infamously, FTX.