Amid Paxos Regulatory Scrutiny, Paypal Suspends Its Stablecoin Project

In response to heightened scrutiny around the cryptocurrency industry, PayPal is reportedly pausing the development of its stablecoin.

As Trade Algo reported, the payments company had intended to unveil the stablecoin within a few weeks, citing a source familiar with the matter, the company had planned to announce the stablecoin in the short term.

As reported by Trade Algo, PayPal has been "exploring the possibilities of using stablecoins" and, if it chooses to pursue this option, "we will work closely with credible regulatory authorities if we decide to move forward."

As of yet, PYMNTS has not received a response from PayPal in regards to its comment.

As reported by Trade Algo, the project was halted coincidentally with PayPal’s partner on the stablecoin project, Paxos Trust, being investigated by NYDFS, which is part of the New York State Department of Financial Services.

A report by PYMNTS notes that Paxos' announcement of the investigation is coincidental with its tweet about the "speculation" circulating around its relationship with the U.S. Federal Reserve and the Office of Comptroller of the Currency.

The firm would like to clarify speculation regarding Paxos' application for a national trust bank charter from the OCC: He has not been asked to revoke his application nor has he been denied the charter. There has been a constructive dialogue between Paxos and the OCC throughout.

It seems that PayPal has decided to stop developing its stablecoin at the same time that the crypto industry is facing many obstacles in the aftermath of last year's FTX collapse, according to PYMNTS. These obstacles include the bruising forces of regulatory pressures in the U.S., the increasing disinterest of retail investors in crypto, and the possibility of a potential unbanked future.

In addition to this, if you consider the SEC’s $30 million settlement with the U.S.-based crypto exchange Kraken over its staking product, something that many observers consider to be the biggest development in the cryptocurrency industry in recent years, there’s no doubt it is the highlight of this summer.

Earlier this week, the Securities and Exchange Commission (SEC) accused Kraken's staking service of violating securities law as well as its cryptocurrency-staking products of breaking the law. In exchange for a $30 million fine and a ban from the U.S. market, Kraken does not admit wrongdoing.

SEC Chairman Gary Gensler stated in a statement that crypto intermediaries must provide the proper disclosures and safeguards as required by our laws regardless of whether they are staking as a service, lending, or advancing to other methods.

A number of major cryptocurrency exchanges have, as reported by PYMNTS, begun offering crypto-staking products as a means of diversifying their revenue streams from cryptocurrency transactions and trades as well. As a result of the settlement, Coinbase's shares have suffered the biggest drop in more than half a year, making it the second biggest depositor of staked ether after Bitfinex.