PayPal has halted the debut of its stablecoin amid heightened regulatory scrutiny in the crypto industry and news of a probe by the New York State Department of Financial Services (NYSDF) into its key partner, Paxos.
Crypto firm Paxos was working closely with PayPal to launch a ‘PayPal Coin,’ announced last year when it was leaked by Bloomberg. The coin was intended to be backed by the US dollar.
However, the incumbent launch was halted on Friday. “We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators,” a spokesperson told Bloomberg.
Paxos made headlines this weekend after the Securities and Exchange Commission (SEC) threatened legal action against the firm for minting BUSD, the stablecoin of crypto exchange Binance. The SEC alleges that BUSD is an unregistered security. In response, Paxos has announced that it will no longer issue new BUSD tokens from February 21 onwards.
Binance has been embroiled in scandal that has caught the attention of regulators and criminal investigators on suspicions of money laundering and other financial crimes. Paxos’ legal threat by the SEC suggests that the commission may be closing in on the exchange.
Binance and Paxos partnered in 2019 to launch BUSD, which is also meant to be backed 1:1 with US dollars. Following the news of Paxos’ end to minting, BUSD has slightly lost its peg, trading at a low of $0.9989 earlier on Monday. At press time, the token trades for $0.9997.
Given the regulatory advances made in the past months following the collapse of FTX and others, it remains to be seen if PayPal will follow through and risk the associated regulatory scrutiny with launching a stablecoin in 2023.