PayPal UK to temporarily suspend cryptocurrency purchase services, FCA's new regulations too stringent?

According to a report by CryptoSlate, payment giant PayPal stated in emails sent to some users on August 14 that it will temporarily suspend cryptocurrency purchase services in the UK in the coming months.

PayPal UK to Temporarily Halt Cryptocurrency Purchase Services

The announcement indicates that the service will be suspended starting from October 1, 2023, with expectations to resume in early 2024, although the exact date for the resumption remains unclear. Despite the inability to make purchases, PayPal assures users that they can continue to hold or choose to sell their cryptocurrencies during the service interruption period. PayPal guarantees the safety of users' cryptocurrencies and states that holding these cryptocurrencies will not incur additional fees.

PayPal launched its cryptocurrency services in the UK in August 2021. UK customers of PayPal could buy, sell, and hold BTC, ETH, BCH, and LTC through the PayPal website or mobile app. However, the purchased cryptocurrencies could only be used within the app, and users were unable to transfer the cryptocurrencies to other wallets.

According to its Terms of Service, PayPal only provides customers with the ability to buy, sell, and hold cryptocurrencies. Customers do not receive actual cryptocurrencies; they only purchase the rights to cryptocurrencies, which are held by other PayPal group companies and third-party cryptocurrency service providers. This means that the cryptocurrencies bought and sold by customers are held by PayPal and its vendors, which is why users cannot transfer their cryptocurrencies.

Are FCA's New Regulations Too Strict?

In June of this year, the UK approved the Financial Services and Markets Bill 2023 (FSMB), granting and expanding the authority of relevant authorities to regulate cryptocurrencies and stablecoins. The Financial Conduct Authority (FCA), responsible for regulating financial markets, protecting consumers, and promoting financial stability, has recently taken various actions, including introducing a 24-hour cooling-off period for first-time investors, prohibiting referral bonus schemes, and issuing warnings to cryptocurrency firms to comply with financial promotion rules, or face criminal charges. The order came into effect on October 8, including for overseas companies selling their products to UK customers.

PayPal stated that due to the introduction of new rules by the UK's Financial Conduct Authority (FCA), the company will suspend cryptocurrency purchases. The company mentioned that these regulations will require them to implement additional steps before customers can purchase cryptocurrencies.

Given the timing, PayPal may be preparing the necessary processes to comply with the new regulations to avoid penalties once the new regime is in place.