The payment giant PayPal is pausing its own cryptocurrency launch as regulators step up pressure on the industry. PayPal’s stablecoin was supposed to be dollar-backed and set to launch in the coming weeks, but the project has been delayed as the company tries to understand the ever-changing regulatory landscape.
PayPal’s concerns were heightened by the New York State Department of Financial Services’ investigation into Paxos Trust Co., which the company was working with on its stablecoin project. Although Paxos is regulated and committed to consumer protection, the research added uncertainty to the project.
Stablecoins are meant to hold a fixed value and some are backed by a corresponding reserve of assets. PayPal had announced its interest in launching its own stablecoin in 2020 as part of its cryptocurrency initiative.
The company stated that if and when it decides to move forward with the project, it will work closely with the relevant regulators. In addition to the Paxos investigation, PayPal is also under investigation by the US Consumer Financial Protection Bureau regarding accidental payments made through the Venmo app.
“We are investigating a stablecoin”, Amanda Miller, a spokeswoman for PayPal, told Bloomberg in an emailed statement. “If and when we want to make progress, we will of course work closely with the relevant regulators.”
Stablecoins in the crosshairs of authorities
The New York Department of Financial Services (NYDFS) is investigating Paxos Trust Company, a New York-based company that issues stablecoins such as Paxos Dollar and Binance USD.
Paxos reports on its website that the reserves of both issued stablecoins are held entirely in cash and US Treasuries and backed 1:1 by the US dollar. Binance USD is the third largest stablecoin in the world, valued at $900 million, according to CoinGecko.
After the collapse of the Terra LUNA ecosystem, the NYDFS released a report with guidelines for stablecoins, aimed at ensuring adequate asset security. The purpose of the department is to protect consumers and institutions from the threats and vulnerabilities arising from the volatility of the cryptocurrency market.
The collapse of FTX and many other cryptocurrency companies is believed to have forced the department to launch multiple investigations at once, including against Paxos.
This is not the NYDFS’s first survey of stablecoins this year. In January, the agency reached a $100 million settlement with Coinbase’s U.S. unit that reportedly allowed customers to open accounts without due diligence.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
