PayPal is reportedly pausing its stablecoin project amid heightened scrutiny around the cryptocurrency industry.
The payments company had wanted to unveil the stablecoin in the next few weeks, Bloomberg News reported Friday (Feb. 10), citing a source familiar with the matter.
Bloomberg notes that the pause coincided with the news that PayPal’s partner on the stablecoin project, Paxos Trust, was under investigation by the New York State Department of Financial Services (NYDFS).
As PYMNTS reported, news of the investigation came two days after Paxos took to Twitter to address “speculation” around its relationship with the U.S. Office of the Comptroller of the Currency (OCC).
“To clarify speculation: Paxos has not been asked to withdraw its application for a national trust bank charter from the OCC, nor has it been denied the charter,” the firm said. “Paxos continues to work constructively with the OCC.”
PayPal’s apparent decision to put its stablecoin on hold is happening as the crypto sector is facing a number of obstacles in the wake of last year’s FTX collapse, as PYMNTS wrote recently, including “brute-force regulatory pressures in the U.S., increasingly disinterested retail investors,” and “a potentially unbanked future.”
Add to all this the Securities and Exchange Commission’s (SEC) $30 million settlement with the U.S.-based crypto exchange Kraken around its staking product, something many observers consider to be the biggest recent development in the crypto sector.
The SEC alleged that Kraken’s staking service was an illegal sale of securities and that its crypto-staking products broke the rules. Kraken did not admit to wrongdoing but agreed to pay a $30 million fine and discontinue its products in the U.S.
“Whether it’s through staking-as-a-service, lending or other means, crypto intermediaries must provide the proper disclosures and safeguards required by our laws.” SEC Chairman Gary Gensler said.
As PYMNTS noted, major crypto exchanges such as Coinbase and Binance have themselves begun offering crypto-staking products to diversify their revenues. Coinbase is the second-largest depositor of staked ether, and saw its shares drop the most in more than half a year following the settlement.