Apart from the changing regulatory landscape of cryptocurrencies, the company is also concerned about its partner, Paxos, which is facing an investigation by the New York State Department of Financial Services. Cryptocurrency firm Paxos has been working with PayPal on a stablecoin project but has now come under investigation by financial regulators.
According to Bloomberg, reserves for both of the stablecoins Paxos issues are held wholly in cash and US Treasuries. The company also expresses its commitment to consumer protection on its website. PayPal officials cited by the same source expressed that they are working on a stablecoin and will only move forward with it in compliance with relevant regulations.
PayPal’s stablecoin will be backed one-for-one by the US dollar, and the company was planning to release it in the coming weeks. As mentioned in The Paypers Crypto Payments and Web 3.0 for Banks, Merchants, and PSPs report, stablecoins are known for their resistance to volatility, which means that users aren't likely to experience any significant price changes when interacting with them. The prices of stablecoins are tied to a reserve asset such as the USD or gold. For example, BUSD, USD Coin (USDC), and Tether (USDT) are all backed on a 1:1 basis with the USD.
In October 2020, PayPal received a conditional BitLicense from the New York State Department of Financial Services (NYDFS) to launch a new service. With this new service, customers received the ability to buy, hold, and sell cryptocurrency (initially Bitcoin, Ethereum, Bitcoin Cash, and Litecoin) directly within the PayPal digital wallet. According to Bloomberg, in June 2022, PayPal became the first company to convert a conditional BitLicense into a full one, which meant that its users could transfer their coins, including from crypto exchanges such as Coinbase.
In December 2022, PayPal partnered MetaMask to allow users to purchase cryptocurrencies via the MetaMask platform using their PayPal accounts. Through this partnership, PayPal wanted to help those who are new to cryptocurrencies start out on their journey. To this end, the company behind MetaMask, ConsenSys, has agreed to add an integration in its crypto wallet that will allow users to purchase cryptocurrencies in a straightforward way using their PayPal accounts.
For more information about PayPal, please check out their detailed profile in our dedicated, industry-specific Company Database.
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