The increased regulatory scrutiny to improve cryptocurrencies has facilitated PayPal Holdings to slam the brakes on its stablecoin. According to a Bloomberg report, the news came a day after the New York Department of Financial Services was probing Paxos, a key partner with which PayPal had been working, on its stablecoin project.
PayPal is pausing work on its stablecoin as regulators increase scrutiny of cryptocurrencies and a key partner in the project faces a probe in New York https://t.co/5wKfuT9g70
— Bloomberg Crypto (@crypto) February 12, 2023
PayPal, an online service provider, hoped to launch the stablecoin backed one-by-one by the US Dollar in the coming weeks. However, there will be a delay as the platform attempts to understand the improved regulatory aspects for such digital assets, citing a source familiar with the matter.
Notably, Amanda Miller, PayPal spokesperson, noted in an emailed statement that:
We are exploring a stablecoin. If and when we want to make advancements, we will, of course, work closely with suitable regulators.
Nonetheless, stablecoins are meant to hold a fixed value. On the other hand, some are backed by a corresponding reserve of assets, including bonds and cash. In 2021, reports speculated that PayPal was looking into launching its stablecoin. At that time, the sources noted that the payment giant was holding talks with third-party developers such as Ava Labs as part of the process.
The issuer of a Binance-branded token among the third largest stablecoin, the New York-based platform Paxos, is regulated by the State Department of Financial Services. The platform emphasizes its commitment to consumer protection, noting that reserves for each stablecoin it issues are held entirely in US Treasury bonds and cash. Additionally, Paxos stresses its stablecoin, known as Pax Greenback, on its website.
PayPal takes root in the crypto space
The payment provider, however, has rocked the airwaves with its crypto industry development. In October 2020, the firm revealed that it was adding crypto to its payment application, enabling its users to purchase and hold crypto.
Last year, PayPal confirmed that the Department of Financial Services had granted the agency a “BitLicense.” BitLicense governs platforms that work with digital currencies. However, at the time, PayPal noted that it was the first firm to convert a conditional BitLicense into a full one.
Crypto market challenges
The crypto market has been slapped with various challenges since last year, shaking the faith of many in the industry. This began with some of the greatest players in the industry, including Terra and its sister Luna and FTX collapsing, sparking threats in the financial world.
Aside from the fall of various crypto giants, multiple companies filed for bankruptcy protection. It led to strict worldwide regulatory scrutiny of platforms operating in the crypto ecosystems by regulatory bodies, including the Securities and Exchange Commission (SEC).
Notably, the macroeconomic weakness has also begun to pressure growth at PayPal’s essential operation as consumers continue to spend primarily. According to Chief Executive Dan Schulman, this comes under pressure because of the high cost of living triggered by decades of high inflation, particularly discretional purchases. Nonetheless, the platform’s upbeat forecast comes along with its previously revealed obligation to lower expenses.
In late January, PayPal announced it would lay off 7% of its workforce due to the economic slowdown to reduce operational costs. Additionally, the platform noted that it expects a whole year profit adjusted to roughly $4.87 per share basis. However, at the end of last year, the payment provider earned a profit of $1.24 per share on an adjusted basis.
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