Maxine Waters, the top Democrat on the House Financial Services Committee, criticized PayPal Holdings Inc.’s launch this week of a stablecoin in the absence of US regulation for that corner of the cryptocurrency world.
(Bloomberg) — Maxine Waters, the top Democrat on the House Financial Services Committee, criticized PayPal Holdings Inc.’s launch this week of a stablecoin in the absence of US regulation for that corner of the cryptocurrency world.
“I am deeply concerned that PayPal has chosen to launch its own stablecoin while there is still no federal framework for regulation, oversight, and enforcement of these assets,” Waters said in a statement Wednesday.
Stablecoins — crypto tokens that are pegged to an asset like the dollar — have been around for almost a decade, but they’re mostly used by traders to move digital assets between exchanges and have made limited inroads into consumer payments.
Waters also criticized a stablecoin bill that the House committee advanced last month. She called the proposed legislation, which is being championed by Patrick McHenry, a Republican from North Carolina, “toxic and problematic” and said that it would harm consumers, since it doesn’t give the Federal Reserve the ability to oversee the assets. McHenry said in a statement Monday that PayPal’s stablecoin shows promise as a payments system.
“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,” Waters said.
The PayPal USD (PYUSD) stablecoin is pegged to the dollar and is issued by Paxos Trust Co. PayPal said Monday that the currency is backed by dollar deposits, short-term Treasuries and similar cash equivalents, and that it will gradually be made available to its US customers and on its Venmo payments app. Chief Executive Officer Dan Schulman told Bloomberg in an interview that the San Jose, California-based company held extensive discussions with US regulators and policymakers ahead of the launch.
The launch of PYUSD dredged up comparisons to Meta Platforms Inc.’s failed stablecoin, which was called Libra before rebranding to Diem. Waters had been one of the most vocal critics of the project, citing it as an example of the tech giant’s “unchecked expansion” and urging the company stop developing the currency.
When Meta CEO Mark Zuckerberg testified before Congress in 2019 and answered questions about Libra, Waters led the charge in grilling him about the project and the potential risks it posed to users and the economy. The controversy and opposition around Meta’s stablecoin ambitions culminated in the company abandoning the effort last year.
PayPal fell 1.1% to $62.49 as of 1:43 p.m. in New York. The shares down about 12% this year.
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