PayPal will pause all UK customer crypto sales through its platform from October in response to new rules on crypto promotions.

The Financial Conduct Authority will later this year implement tougher rules on how crypto assets are advertised to UK consumers.

The new rules will, among other restrictions, require crypto firms to publish risk warnings alongside advertising and cease offering ‘refer a friend’ bonuses.

PayPal said it will ‘temporarily pause’ the ability for customers to buy crypto on its platform from 1 October

In an email sent to customers, the fintech company said it will ‘temporarily pause’ the ability for customers to buy crypto on its platform from 1 October as it works to satisfy the new regulations, which come into effect on 8 October

‘PayPal consistently works closely with regulators around the world to adhere to applicable rules and regulations in the markets in which we operate,’ it told customers.

It added that customers could hold and sell their crypto ‘at any time’.

In May, MPs called for the government to regulate trading in cryptocurrencies in the same way as gambling, amid concerns it poses significant risks to consumers.

When the FCA announced its crypto marketing shake-up in June, its executive director of consumers and competition Sheldon Mills said: ‘It is up to people to decide whether they buy crypto.

‘But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.

‘Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.

‘The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.’

Calls for better regulation are also growing worldwide as consumers, regulators and governments grapple with scam activity and the use of crypto by criminal organisations operating undetected. 

The collapse of several crypto firms including FTX last year has also left amateur investors nursing large losses.

Sam Bankman-Fried, stepped down as head of FTX last November after withdrawals left it short of cash, leading to bankruptcy.

Allegations swirled that he ran it as a ‘personal fiefdom’ while spending £250million on property.

Around 1million creditors face losses of billions of pounds, among them an estimated 80,000 Britons.

After token prices slumped dramatically last year, the price of top cryptocurrency bitcoin has gradually recovered, up around 76 per cent so far this year. However, its price is at less than half of the all-time high reached in November 2021.

Earlier this month, PayPal’s shares got a boost, when it launched a stablecoin, becoming the first major financial technology firm to embrace digital currencies for payments and transfers.

The California-based company launched, PayPal USD, which is issued by Paxos Trust Company and is a cryptocurrency that unlike bitcoin is tied to a fiat currency, the U.S dollar.

The group also said that the digital currency will first only be made available for U.S-based PayPal customers, with the exception of Hawaii and would be redeemable one-to-one for US dollars.

The crypto world plunged deeper into crisis yesterday as US regulators targeted two of the world’s largest exchanges.

In a move that sent shockwaves through the industry, the Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase over claims the trading platform was operating illegally in the country.

The case against Coinbase came just a day after the SEC accused Binance and its boss of ‘an extensive web of deception’ and ‘calculated evasion’ of US laws.

The two companies together account for around half of global trading in digital assets such as bitcoin.

The cases represent a widening crackdown on the crypto industry, which SEC chairman Gary Gensler has branded a ‘Wild West’ for investments. 

Allegations: The US Securities and Exchange Commission has filed a lawsuit against crypto exchange Coinbase over claims the trading platform was operating illegally in the country

For Coinbase, the SEC alleges bosses were ‘fully aware’ that its business was subject to securities laws, including registering as a broker and exchange, but decided to ignore it.

‘Coinbase’s alleged failures deprive investors of critical protections, including rule books that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC,’ Mr Gensler said.

The Wall Street regulator has also launched an attack on the world’s largest crypto currency exchange, Binance.

On Monday, the SEC sued the firm and its founder Changpeng Zhao, accusing it of mishandling customer funds, inflating trading volume on the site and taking steps to dodge US regulation.

The complaint claims Binance secretly commingled ‘billions of dollars’ of customers’ assets and sent them to a third party, Merit Peak Limited, which is owned by Zhao. 

Outlining 13 civil charges, Gensler said: ‘We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.’

The regulator accused Zhao of seeking to enrich himself with little regard for his investors.

‘We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximise their own profits,’ said Gurbir Grewal, director of the SEC’s enforcement division.

Regulators have been on red alert after a string of high-profile collapses wiped out more than a trillion dollars from crypto’s market capitalisation last year. 

The collapse of FTX in November was the biggest of these failures, sparking a cryptocurrency rout and leaving an estimated one million creditors facing losses of billions of dollars.

Arrest: Disgraced FTX founder and chief exec Sam Bankman-Fried (pictured) is facing 13 charges including fraud and money laundering as well as foreign bribery

Disgraced FTX founder and chief executive Sam Bankman-Fried is facing 13 charges including fraud and money laundering as well as foreign bribery. 

He has denied all charges against him and is under house arrest at his parents’ home in California until trial later this year. Analysts have said the crypto world is still feeling a hangover from the FTX drama.

‘The robust language used by the SEC, along with the lengthy list of charges, suggests this latest fiasco to engulf the crypto market is going to rumble on for some time,’ said Laith Khalaf, head of investment analysis at AJ Bell.

‘At the moment it feels like the crypto bubble is suffering death by a thousand punctures.’

In a response to the news of the lawsuit against Binance, its boss Zhao wrote on Twitter: ‘Our team is all standing by, ensuring systems are stable, including withdrawals and deposits. We will issue a response once we see the complaint. Haven’t seen it yet.’

He claimed Binance’s ‘size and global name recognition’ meant it has become ‘an easy target now caught in the middle of a US regulatory tug-of-war’.

Binance has over 100m customers across the world and the founder accused the SEC of lodging the suit just to ‘make headlines’.

Coinbase chief legal officer Paul Grewal said: ‘The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance. The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation.

‘In the meantime, we’ll continue to operate our business as usual.’

Bosses in the firing line 

In the firing line: Coinbase’s Brian Armstrong and Binance’s Changpeng Zha

The latest crypto clampdown has thrust two of the industry’s biggest names into the spotlight.

Binance’s Changpeng Zhao and Coinbase’s Brian Armstrong have enjoyed meteoric success in recent years.

Zhao, 46, a Chinese-born Canadian known as CZ, launched Binance in Shanghai in 2017.

Fast forward six years and the exchange has become the largest in the world – processing trades worth £52billion a day – and he is estimated to be worth £8.5billion. Coinbase was also under fire.

San-Francisco based Coinbase was founded in 2012 by former Airbnb engineer Armstrong and Fred Ehrsam.

The company made its Nasdaq debut in 2021 at the height of the crypto frenzy with a value of £69billion.

Although shares have plunged nearly a third in the past six months – largely driven by the fallout from FTX’s bankruptcy spooking investors – Armstrong, 40, is still worth an estimated £1.8billion.