PayPal is suspending 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 revealed in the coming weeks, despite announcing its financial results for the fourth quarter of 2022 on Thursday.

Back in August 2022, stablecoin issuer PayPal and 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 are after PayPal Crypto partner, Paxos

According to reports, the NYDFS is examining Paxos, though the scope of the investigation has not been fully disclosed in detail.

As this develops, the US Office of the Comptroller continues to set its sights on protecting consumers from potential risks related to the cryptocurrency market.

The OCC is said to be in constant contact with the regulated companies to understand the vulnerabilities and liabilities that consumers may face due to the volatility of the cryptocurrency market.

Image: CoolWallet

Paxos stablecoins include the Pax dollar (USDP) and the Binance USD (BUSD), a stablecoin that is offered by a white-label organization with the Binance brand.

Paxos emphasizes its dedication to consumer protection on its website and states that the assets for each of the stablecoins it produces are stored entirely in cash and US Treasury bonds.

In an emailed statement, a PayPal representative said:

“We are exploring a stablecoin; if and when we seek to move forward, we will of course work closely with the relevant regulators.”

Cases of popularity and use of stablecoins

Stablecoins are digital currencies that are developed to maintain a stable value relative to another asset, often a fiat currency such as dollars or euros.

In recent years, it has grown in popularity due to its 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 it an attractive alternative to volatile cryptocurrencies such as Bitcoin and Ethereum.

In the rapidly expanding world of cryptocurrency, the growing popularity of stablecoins has been driven by the demand for a more stable and reliable transaction method.

Meanwhile, the recent failure of several major cryptocurrency market participants, especially FTX, has eroded investor confidence in what was once considered the next big thing in finance.

The pause in PayPal’s stablecoin creation follows a slew of recent regulatory actions against crypto companies. According to an unidentified source who spoke to Bloomberg, the action forced the payments company to stop its pursuit of its coin.

Crypto total market cap at $966 billion on the weekend chart | Chart: TradingView.com

In the past two years, PayPal has made a serious foray into cryptocurrency, enabling users to buy Bitcoin, Ethereum, Bitcoin Cash, and Litecoin using its digital wallet.

In January last year, PayPal announced its intention to study creating its own stablecoin. This was long before cryptocurrency giants like Celsius, Voyager and, most famously, FTX went bankrupt and collapsed in the following months.

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