Payment giant PayPal has become the latest firm to receive an operational license from the UK’s Financial Conduct Authority (FCA) to offer virtual currency services after a lengthy application process.
According to details on the FCA’s official website, PayPal UK Limited has been granted the go-ahead to dabble in “certain crypto asset activities.” The license allows PayPal to offer crypto advertisements and other services but faces several restrictions imposed by the financial regulator.
“The Financial Conduct Authority has approved PayPal UK Ltd as an authorized electronic money institution and consumer credit firm and registration as a crypto asset business, enabling the transfer of PayPal’s U.K. customer accounts to this new U.K. customer accounts to this new U.K. entity form Paypal Europe on 1 November 2023,” said a PayPal spokesperson.
Per the FCA’s disclosure, PayPal is barred from dabbling in initial coin offerings (ICOs), staking and lending, and borrowing in decentralized finance (DeFi) except with the express consent of the regulator. It appears PayPal is also barred from supporting peer-to-peer exchanges and will have to restrict existing customers to its hold-and-sell functionalities.
The restrictions prevent PayPal from onboarding new users for its crypto services, with existing customers unable to buy digital assets like Bitcoin (BTC) following a temporary ban in October.
At the time, PayPal said the pause in buy functionality stems from new FCA regulations, with the company hinting at full operations sometime in 2024.
“We’re taking this measure in response to new rules enacted by the UK Financial Conduct Authority (FCA) that require crypto firms to implement additional steps before customers can purchase crypto,” said PayPal. “While we work to satisfy these new regulations, you won’t be able to buy crypto using PayPal.”
Cracking down on erring industry players
The receipt of PayPal’s license brings the total number of licensed crypto firms in the UK to four, following previous approvals given to Bitstamp, Interactive Brokers, and Komainu. A hawkish stance by the FCA has seen several unregistered virtual asset service providers halt their services in the UK, including Bybit and Luno.
The FCA has since shut down the activities of unregistered Bitcoin ATMs in the country while rolling out new guidelines for promotional activities.
“Essentially, all communications to UK consumers in relation to crypto assets, which could be seen as an invitation or inducement to invest, must comply with the rules,” said Asim Arshard, associate at Lawrence Stephens.