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PayPal Halts Bitcoin and Ethereum Purchases Until 2024 — Cites Regulatory Pressure

Published August 17, 2023 2:37 PM
Omar Elorfaly
Published August 17, 2023 2:37 PM

Key Takeaways

  • PayPal is forced to halt crypto trade in the UK under new regulations
  • UK regulators aim to implement strict rules on crypto, including removing advertisements
  • PayPal continues to promise a US stablecoin despite governmental scrutiny

PayPal UK (PYPL.O) announced  in an email sent to customers it will be halting buying and selling of crypto tokens on its platform. The company’s decision comes following a new set of regulations set forth by the UK government. 

Transparent Crypto Trading

The new regulations  introduced by the Financial Conduct Authority (FCA) aim to limit advertising in the crypto market. In the meantime, the government is working on creating clear and strict guidelines for the sale of digital assets in the country.

Redistricting advertisements in the British crypto space is the result of the new direction created by the FCA, where the regulating body aims to protect customers from making “hasty decisions.”

Executive director at the FCA’s consumers and competition division, Sheldon Mills, said  that “It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision.”

He added, “Consumers should still be aware that crypto remains largely unregulated and high risk.”

Therefore, the FCA is currently ordering crypto institutions to cease any “refer a friend” feature on their platform as it sees it as a misleading advertising approach.

Moreover, crypto companies will be forced to warn users before trading, such as “Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong.”

The new rule set comes as part of the regulatory overhaul  the UK government plans for the crypto trade as a result of collapses such as FTX and Terraform Labs.

In his proposal , Financial Services Minister Andrew Griffith said, “Our view is that this reinforces the case for clear, effective, timely regulation and proactive engagement with industry,” adding that “This includes a proposal to bring centralized cryptoasset exchanges into financial services regulation for the first time, as well as other core activities like custody and lending.”

The drastic change in regulations may offer extra challenges to companies like PayPal in the crypto space. However, a senior personal finance analyst at the investment platform Interactive Investor sees  said regulations as a positive change as he currently views the crypto market as a “wild west of dubious claims and misleading information.”

“The challenge for the regulator is to devise a robust customer knowledge framework so that all the players involved know what good looks like.”

PayPal did not immediately respond to a request for comment.

Another Day At The Office In The U.S.

In the meantime, PayPal’s operations in the US remain undeterred. The company is currently enjoying the hype it’s gathering after the announcement of its native stablecoin PYUSD.

However, the announcement was not met with no resistance. Members of the US government have been in a discussion regarding the company’s stablecoin since its announcement.

Congresswoman Maxine Waters made a statement  on the 11th of August where she voiced her concerns regarding PYUSD.

“Given PayPal’s size and reach, Federal oversight and enforcement of its stablecoin operations is essential in order to guarantee consumer protections and alleviate financial stability concerns.”

She added, “Without legislation on the books that establish clear and strong consumer protections at the Federal level, consumers are at greater risk of harm at the hands of bad actors.”

However, the same sentiment was not shared by the Chairman of the House Financial Services Committee, Patrick McHenry, who also issued a lengthy statement  on the matter.

“This announcement is a clear signal that stablecoins-if issued under a clear regulatory framework-hold, promise as a pillar of our 21st-century payments system,” reported McHenry. He added, “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. “

“We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future. We must finish the job.”

PayPal is also maintaining the option to trade other crypto tokens on its platform in the US, as UK regulations only apply to local markets.

 

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