PayPal Pauses Stablecoin Project Amid Paxos Investigation

Key Points:

• PayPal has suspended work on its stablecoin due to growing regulatory scrutiny.
• Paxos emphasizes consumer protection on its website and states that the reserves for both stablecoins it issues are entirely kept in US Treasury bonds and cash.
• PayPal made it known that it was developing a stablecoin that would be pegged 1:1 to the dollar.

PayPal has suspended work on its stablecoin due to growing regulatory scrutiny.

According to Bloomberg, the stablecoin was supposed to have been released in the following weeks. The announcement came a day after it was reported that the New York Department of Financial Services was looking into Paxos, who PayPal had been collaborating with on its stablecoin initiative.

“We are exploring a stablecoin,” a PayPal spokesperson said. “If and when we seek to move forward, we will of course, work closely with relevant regulators.”

Stablecoins are designed to maintain a fixed value, and some of them are supported by a corresponding reserve of assets like cash and bonds. The first to disclose that PayPal, located in San Jose, California, was considering launching its own stablecoin as part of its push into cryptocurrencies.

The state’s Department of Financial Services oversees New York-based Paxos, which issuing the third-largest stablecoin using the Binance brand. Paxos emphasizes consumer protection on its website and states that the reserves for both of the stablecoins it issues are entirely kept in US Treasury bonds and cash. Pax Dollar, the company’s own stablecoin, is also released.

Early last year, PayPal made it known that it was developing a stablecoin that would be pegged 1:1 to the dollar. In June, in the wake of the Terra collapse, the New York regulator released stablecoin guidance and informed issuers that stablecoins needed to be backed by assets that were maintained apart from the issuers’ finances. This authority also granted Paxos a virtual currency license.

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