US Congresswoman Raises Concerns About Paypal Stablecoin In The Absence Of Regulation

Earlier this week, popular American payment giant Paypal unveiled the launch of its USD-pegged PYUSD stablecoins to investors. In response, Democrat congresswoman Maxine Waters has raised palpable concerns that may or may not threaten the stablecoin’s operations.

Reacting to the news of Paypal’s PYUSD stablecoin launch, congresswoman Maxine Waters noted that the launch comes at a time when there was no legislative mechanism to regulate these assets. 

She stated that “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 further noted that “stablecoins represent the issuance of a new form of money, making it integral that there are federal guardrails.” 

Waters’ recent comments are in contrast with those of the House Financial Services Committee Rep. Patrick McHenry, who had earlier lauded PayPal’s launch. According to him, the recent announcement was “a clear signal that stablecoin, if issued under a clear regulatory framework, holds promise as a pillar of our 21st century payment system”

Last month, the US House Financial Services Committee also introduced a bill to set up a federal regulatory framework for stablecoins, focusing on guidelines for registration and licensing for stablecoin issuers. 

Although stablecoins have been around for several years, they have not been able to enjoy significant attention within the mainstream consumer payment ecosystem. Similar efforts by popular non-cryptocurrency firms, such as Meta Platforms, to launch stablecoin services faced harsh resistance from policymakers and global financial regulators. 

In the face of regulatory uncertainty, it is always critical whenever a lawmaker has something to say about virtual currencies.

According to a report published on August 9 by popular market analyst Bernstein, the stablecoin industry is projected to reach a $2.8 trillion valuation in the next five years. This represents a whooping 22x increase from the present $125 billion valuation of the industry, and PayPal is looking to take advantage of this expected increase through its recent release of the PYUSD stablecoin. 

The leading payment giant revealed that the stablecoin will be “100% backed by US dollar deposits, short-term US Treasuries, and similar cash equivalents.” The coins will be redeemable 1:1 for US dollars and issued by US-based Paxos Trust Co. Consumers will also be able to convert any crypto supported by PayPal to and from PayPal USD (PYUSD).  

However, aside from the current legislative tussle, PayPal will also face competition from existing players such as Tether and Circle. Tether’s USDT and Circle’s USDC are the largest stablecoins, with market caps of over $83 billion and $26 billion, respectively.