PayPal has reportedly halted the development of its stablecoin in response to the current assault on the crypto industry by US officials. The stablecoin was created in collaboration with Paxos Trust Company, a blockchain firm under investigation by the New York Department of Financial Services.
PayPal feels the crypto heat
Bloomberg reported that PayPal intended to launch its new stablecoin in the coming weeks. However, according to a source with knowledge of the situation, the launch of the stablecoin has been postponed due to the increasing regulatory monitoring of crypto businesses since the start of the year.
This includes the NYDFS’s investigation of Paxos and the controversial $30 million settlement reached with cryptocurrency exchange Kraken, which shut down all staking services in the United States. In addition, the renewed crackdown on centralized cryptocurrency organizations has resulted in traders and investors flocking to DeFi staking systems for their staking requirements.
We are exploring a stablecoin. If and when we seek to move forward, we will, of course, work closely with relevant regulators.Amanda Miller, spokeswoman for PayPal
The crypto market is experiencing turbulence due to the failure of some of its largest players, notably FTX, which has undermined investor confidence in what was once considered the next big thing in the financial world.
A succession of high-profile bankruptcy has prompted intense global regulatory scrutiny of crypto companies.
The macroeconomic instability has also begun to weigh on PayPal’s core business growth, as consumer spending, particularly discretionary expenditures, is under pressure due to a cost-of-living problem caused by decades of rising inflation.
Additionally, PayPal is being investigated by the Consumer Financial Protection Bureau (CFPB). The investigation apparently relates to how the fintech company handles clients who transfer Venmo payments to the incorrect recipient. Several U.S. senators, like as Senator Elizabeth Warren, have exerted pressure on the CFPB on this issue.
SEC’s Chair demands full disclosure
Gary Gensler, chairman of the Securities and Exchange Commission (SEC), stated in a CNBC interview that crypto companies would perish if they do not comply with free and fair disclosure rules.
Gensler stated that “the runway is getting terrifyingly short for crypto startups that continue to escape full disclosure by large tech corporations such as Apple.
Andrew Ross Sorkin, an anchor for CNBC, questioned Gensler as to why the SEC’s favored technique of regulating through enforcement, combined with accounting rules and inspections, was not formalized in the form of explicit policy guidelines.
Gensler, a Democrat, has long argued that the Securities Act of 1933 adequately regulates the cryptocurrency industry. However, he has not openly engaged legislators on draft crypto regulatory measures seeking attention.
This methodology is different from that of other agencies. For example, in 2023, the chairman of the Commodity Futures Trading Commission, Rostin Behnam, announced a willingness to collaborate with Congress on crypto regulation.
SEC’s Kraken crackdown puts the crypto industry to worry
In a speech on February 10, 2023, SEC Commissioner Hester Peirce stated that the agency did not engage crypto business Kraken before cracking down on the company’s crypto staking service, despite Gensler’s claims that he spoke with industry participants.
In a previous blog post, Commissioner Peirce disagreed with the SEC’s claim that Kraken should have registered its staking business with the agency. She clarified that there are no explicit instructions regarding how Kraken would have registered the goods.
She stated that it was unclear whether each product required separate registration or whether a single registration covered the entire program. The SEC’s attack on Kraken follows several attempts by U.S. financial institutions to hinder the cryptocurrency business.
In a recent blog article, crypto venture capitalist Nic Carter compared the banking industry’s growing reluctance to cooperate with crypto businesses to Operation Choke Point.
Operation Choke Point was a scheme created by the Obama administration to limit the size of specific businesses by severing banking ties. While the program has been terminated, Carter contends that it predisposed banks to assign greater risk to politically divisive industries.
Peirce described the action, for which Kraken paid a $30 million settlement fee, as “paternalistic and lazy” because of the lack of prior advice. In addition, she said that enforcement by action would not clarify the disclosure obligations for other stake products with various constructions.