Democratic Representative Maxine Waters has voiced concerns over PayPal's recent launch of a stablecoin, criticizing the move due to the absence of federal regulation for this sector of the cryptocurrency market. In a statement, Waters expressed her deep concern that PayPal's decision to introduce its own stablecoin came at a time when there is no established framework for regulating, overseeing, and enforcing such assets.
Stablecoins, which are digital tokens pegged to an asset like the US dollar, have been in existence for almost a decade. However, their use has been mostly limited to traders facilitating the movement of digital assets between exchanges and they have made minimal progress in consumer payments.
Waters also took aim at a stablecoin bill that recently advanced in the House Financial Services Committee, labeling it "toxic and problematic." The proposed bill, championed by Republican Congressman Patrick McHenry from North Carolina, is criticized for not granting the Federal Reserve the authority to oversee these assets. McHenry, on the other hand, sees potential in PayPal's stablecoin as a payment system.
Waters warned that without clear and robust consumer protections established under federal legislation, customers are at a higher risk of harm from malicious actors operating in the market.
PayPal's stablecoin, called PayPal USD (PYUSD), is pegged to the US dollar and is issued by Paxos Trust Co. The company stated that the currency is backed by dollar deposits, short-term Treasuries, and similar cash equivalents. Initially, it will be gradually rolled out to US customers and integrated into PayPal's Venmo payments app. PayPal's CEO, Dan Schulman, revealed that the company engaged in extensive discussions with US regulators and policymakers prior to the stablecoin's launch, underscoring their commitment to compliance.
The launch of PYUSD has reignited comparisons to Meta Platforms Inc.'s failed stablecoin, previously known as Libra and now rebranded as Diem. Waters had been a vocal critic of the project, citing it as an example of the tech giant's unchecked expansion and urging them to halt the currency's development.
During CEO Mark Zuckerberg's testimony before Congress in 2019, Waters played a leading role in challenging him about the risks posed by Libra to users and the economy. Opposition and controversy surrounding Meta's stablecoin project eventually led to the company abandoning its efforts last year.
Following Waters' critique, PayPal's stock fell 1.1% to $62.49 in New York trading. The shares have experienced a decline of approximately 12% this year.