PayPal announced that it has halted its plans to use Paxos’ stablecoin, Paxos Standard Token (PAX), to power its payments platform due to concerns about regulatory scrutiny. PayPal’s announcement comes after a New York Department of Financial Services (NYDFS) investigation into the company’s partnership with Paxos. The probe was prompted by a complaint filed by the crypto exchange Coinbase.
The NYDFS is investigating whether PayPal and Paxos violated anti-money laundering laws, according to the Wall Street Journal.
On February 11, Bloomberg, one of the leading financial media outlets, reported that PayPal Holdings Inc. is delaying working on its stablecoin as authorities raise the attention of cryptocurrencies and a significant partner in the project faces an investigation.
PayPal Halts Stablecoin Plans: What We Know So Far
PayPal (PYPL) announced its fourth-quarter profits for 2022 on February 9. Despite releasing financial figures, PayPal appears to have decided to delay the launch of its stablecoin. Initially, the company planned to launch the stablecoin, which would be pegged 1:1 to the US dollar, in the coming weeks. However, it has decided not to proceed with the release and will postpone that initiative in order to better understand how the regulations for such digital assets are changing.
Paxos Trust Company, a blockchain company under investigation, also worked with developers to create the stablecoin.
According to media reports, online payment service provider PayPal has put their cryptocurrency plans on hold due to increased regulation of cryptocurrencies. An investigation is now underway by the New York Department of Financial Services (NYDFS) into a stablecoin issuer and PayPal partner, Paxos Trust Company.
PayPal spokesperson Amanda Miller stated that the company was looking into stablecoins and that they would move forward once they decided to. She also stated that the company would collaborate closely with regulatory agencies on the matter.
Paxos Under Investigation: What We Know So Far About The Stablecoin Company
According to reports, the New York Department of Financial Services (NYDFS) is looking into Paxos, a stablecoin market leader that publishes the native Paxos stablecoin USDP and the Binance USD (BUSD). The NYDFS declined to comment on the report, stating that the organization could not comment on ongoing investigations.
He did, however, state that the agency is in contact with regulated organizations in order to better understand the risks and vulnerabilities that the current volatility in the cryptocurrency market poses to both customers and businesses. The scope of the investigation is unknown. The investigation into Paxos, on the other hand, stems from the company’s application for a full banking license.
Paxos operates in New York under the prestigious BitLicense granted by the NYDFS. Furthermore, it has obtained a Major Payments Institution license from the Singaporean regulator in order to expand its presence in Asia. Despite the claimed concerns of central financial authorities, the New York-based blockchain network startup has established itself as a market leader.
PayPal & Venmo In Focus
PayPal is being investigated by the Consumer Financial Protection Bureau (CFPB). The investigation, according to reports, focuses on how the fintech company handles clients who accidentally transfer Venmo payments to the wrong recipient. Senator Elizabeth Warren and other US lawmakers have pressed the CFPB on this issue. As a result, it has asked PayPal for information on how it handles clients who accidentally transfer a Venmo payment to the wrong person.
Although PayPal provided more information about the investigation in a regulatory filing on February 10, the authority has long looked into Venmo’s policies regarding unauthorized cash transfers and collections procedures.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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