- Congresswoman Maxine Waters has expressed concern about PayPal’s stablecoin launch, arguing that the company should have first waited for federal regulatory approval
- Waters highlighted the absence of a federal regulatory framework for stablecoins and emphasized the necessity of Federal oversight and enforcement in her statement.
- PayPal’s PYUSD stablecoin was introduced this week, aiming to compete with established stablecoins like USDT and USDC
Democratic Congresswoman Maxine Waters expressed concern on Wednesday over PayPal’s entry into the stablecoin arena, asserting that the company should have awaited federal regulatory approval before launching its own stablecoin. Waters said in a written statement that she was “deeply concerned that PayPal has chosen to launch its own stablecoin” while no Federal framework for regulation was yet in place, saying that Federal oversight and enforcement of its stablecoin is “essential.”
Waters: Consumers at “Greater Risk of Harm”
PayPal revealed its PYUSD stablecoin this week, pitting itself against established stablecoins such as Tether (USDT) and Circle (USDC) in the $125-billion market. Paxos will mint the stablecoin, which will operate on the Ethereum blockchain. While Federal Reserve Chairman Jerome Powell has emphasized the necessity of federal involvement in regulating stablecoins, Paxos predominantly operates under the regulation of the New York State Department of Financial Services.
Waters had previously expressed surprise at New York’s stablecoin regulatory framework and in her statement emphasized the need for federal agencies to supervise stablecoin issuers, underlining their significance as a new form of currency. She argued that federal guardrails are crucial, allowing the Federal Reserve to manage monetary policy and the money supply effectively:
As I’ve said for more than a year, without legislation on the books that establishes clear and strong consumer protections at the Federal level, consumers are at greater risk of harm at the hands of bad actors. Stablecoins represent the issuance of a new form of money, making it integral that there are Federal guardrails.
Republicans Welcome PayPal’s Move
Waters’ comments align with a recent Federal Reserve blog post promising guidance for American banks regarding stablecoin issuance, covering areas like record-keeping, know-your-customer (KYC) rules, and transaction irreversibility.
Chairman Patrick McHenry of the Republican-led House Financial Services Committee welcomed PayPal’s entry into the stablecoin space as a signal for lawmakers to advance comprehensive digital asset regulation. However, Waters criticized the Republican-backed stablecoin bill, labeling it “toxic and problematic.” She contended that the bill could endanger consumers and limit the Federal Reserve’s economic influence.
Waters urged Republicans to collaborate on crafting a more effective bill that safeguards consumers and the financial system while allowing the Federal Reserve to retain its central banking role. The debate over stablecoin regulation continues as the industry faces critical decisions regarding oversight and legal frameworks.
