US House leadership is calling for robust regulatory framework for the new PayPal stablecoin despite being on opposing ends of the discuss.
The leadership of the United States House of Representatives is reacting to the USD stablecoin that PayPal Holdings Inc (NASDAQ: PYPL) recently launched. While a Republican leader generally has positive sentiments toward the PYUSD stablecoin, a Democratic is worried.
On Wednesday, Rep. Maxine Waters of the Financial Services Committee wrote a statement expressing concerns. According to her, the new PayPal stablecoin requires a proper regulatory framework and oversight to ensure compliance and protect investors. She believes customers are at risk without this.
“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,” wrote she.
According to a tweet from Punchbowl News author and reporter Brendan Pedersen, Waters pointed out that the sheer size of the PayPal company is a significant reason why a framework is necessary. According to her, PayPal has 435 million global customers, more than all online accounts of all megabanks put together.
While Waters has sounded a note of warning, the committee chairman Patrick McHenry is in support. Following the passage of the Clarity for Payment Stablecoins Act of 2023, McHenry issued a statement in response to PayPal’s stablecoin launch. Although he also pushed for a regulatory framework, the chairman believes that stablecoins “hold promise as a pillar of our 21st century payments system”. McHenry pushed for clear regulations and consumer protections, saying:
“We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the US leads the financial system of the future. We must finish the job.”
The PayPal Stablecoin
In January last year, PayPal announced plans to develop a native stablecoin after making changes to support crypto on its platform. The year before, PayPal had increased the limit for US users to $100,000 per week.
The payment giant eventually launched the stablecoin on Monday, stating that each PYUSD would be backed by US dollar deposits, Treasuries, and “cash equivalents”. PayPal also added in a statement that Paxos Trust Company would be the official issuer. Paxos is the issuer for its native USDP stablecoin and the now-defunct BUSD stablecoin from Binance.
Furthermore, the statement specifies that on a gradual rollout basis, PayPal customers will be able to perform regular crypto transactions. This would include transferring the PayPal stablecoin between PYUSD wallets and other external wallets and using it for fund purchases. Users can also convert PYUSD to and from supported digital assets.
According to PayPal’s announcement, Paxos will publish a PYUSD Reserve Report for a transparent outlook on its reserves. PayPal also says a third party will publish an official attestation of the value of its reserve assets, according to standards set by the American Institute of Certified Public Accountants (AICPA).