On Wednesday, Democratic Representative Maxine Waters (D-CA) expressed her disapproval of PayPal’s debut of its dollar-pegged stablecoin, PYUSD. Waters believes that PayPal should have awaited a federal regulatory green light before making such a move.
“I am significantly concerned about PayPal rolling out its stablecoin without a clear Federal regulatory framework in place,” she commented in an official statement.
Earlier this week, PayPal made a notable stride by unveiling its stablecoin, PYUSD. This launch marks the first time a major global payment corporation has ventured into crafting its own stablecoin.
The management of this stablecoin, PYUSD, will be under the aegis of Paxos Trust, a reputable crypto financial services firm based in New York. The coin’s value is intended to be solidly anchored by U.S. dollar deposits, supplemented by short-term government securities and equivalent liquid assets.
For PYUSD holders, they’ll be able to seamlessly exchange it for U.S. dollars or other cryptocurrencies within PayPal’s ecosystem, such as bitcoin (BTC), bitcoin cash (BCH), ether (ETH), and Litecoin (LTC).
As the Chairwoman of the House Financial Services Committee, Democrat Maxine Waters pointed out that PayPal’s impressive 435 million global customers exceed the cumulative online accounts of all major banks.
“With the sheer scale and influence of PayPal, it’s imperative for federal authorities to closely monitor and regulate its stablecoin activities,” Waters asserted.
On Wednesday, she reiterated the importance of federal oversight when it comes to stablecoin issuers.
“Stablecoins present a novel form of currency, which underscores the critical need for federal oversight,” Waters commented.
She further noted the importance of empowering the Federal Reserve, the nation’s central banking institution tasked with setting monetary policy and regulating the money supply.
“It’s vital that the Federal Reserve retains its ability to perform its essential functions,” she emphasized.
Legislative Developments and Debates Surrounding U.S. Stablecoins Regulation
Following the $40 billion debacle of Terra’s algorithmic stablecoin, UST, last year, lawmakers felt the urgency to step in. However, legislative momentum on the issue has been tepid at best.
Recently, a bill was greenlit by the House committee to lay down regulations governing U.S. stablecoins. Despite Waters’ disapproval, the bill saw bipartisan support, with several Democrats siding with Republicans. The legislation is now queued for consideration on the House floor. However, even if it gains approval there, Senate Democrats are anticipated to be less receptive.
Waters voiced her objections to the Republican-backed bill, noting its inclination towards state-regulated stablecoins, such as PYUSD, while sidelining the Federal Reserve’s regulatory purview.
She elaborated, “The GOP bill essentially endorses state-sanctioned stablecoins like PayPal USD but simultaneously restricts the Federal Reserve’s authority to implement or enforce any federal standards.”
She further added, “Beyond this, the bill poses a direct challenge to the Federal Reserve’s foundational role as our nation’s central bank. Should stablecoins gain widespread acceptance, this legislation would impede the Fed’s ability to combat inflation or promote full employment effectively.”
Rep. Patrick McHenry (R-North Carolina), the Chair of the House Financial Services Committee, has voiced a contrasting opinion on the matter. In his statement from Monday, he conveyed his support for PayPal’s newly introduced stablecoin.
He stated, “This development signals that, when situated within a clear regulatory framework, stablecoins have the potential to be a cornerstone of our modern payment infrastructure.”
McHenry underscored that the roll-out of PYUSD serves as a reminder to legislators of the pressing need to finalize their regulatory work. However, in contrast, Waters mentioned in April that due to Republican modifications to the bill, lawmakers were essentially starting from scratch. On Wednesday, she reiterated her steadfast opposition.
Waters declared, “As I emphasized during last month’s review, I believe the GOP’s proposal stands little chance of being enacted. I call upon Chair McHenry and fellow Republicans on the Committee to reengage in discussions to draft a more viable piece of legislation.”
She concluded, “The sooner we can reach a consensus, the quicker we can establish safeguards for both consumers and the stability of our financial ecosystem.”