Maxine Waters blasts PayPal’s stablecoin, mulling oversight

Democratic Congresswoman Maxine Waters (D-CA) criticized PayPal’s recent entry into the dollar-pegged stablecoin market, arguing that the company should have awaited federal regulatory approval before launching its stablecoin.

As the top Democrat on the House Financial Services Committee (HFSC), Waters expressed concerns over PayPal’s decision to introduce a stablecoin, saying that there is currently no established federal framework for regulating such assets.

Waters added in a press release on August 9 that the lack of federal regulation poses risks for stablecoins. She highlighted the need for proper oversight, enforcement, and regulatory measures for these assets to ensure consumer protection and financial stability.

“PayPal, with 435 million customers globally, exceeds the number of online accounts at all of the megabanks combined. I am deeply concerned that PayPal has chosen to launch its own stablecoin while there is still no Federal framework for regulation. Given PayPal’s size and reach, Federal oversight and enforcement of its stablecoin operations is essential essential in order to guarantee consumer protections and alleviate financial stability concerns,” she said in a written statement.

The congresswoman’s remarks come as the Federal Reserve indicated in a recent blog post that it plans to provide guidance to American banks regarding stablecoin issuance, covering areas like record-keeping, know-your-customer (KYC) rules, and the potential permanence of transactions.

Waters’ stance is in line with ongoing efforts in Congress to address the regulatory gaps surrounding stablecoins. The Republican-led House Financial Services Committee has advanced a stablecoin bill, with Chairman Patrick McHenry (R-NC) saying that PayPal’s entry into the stablecoin market underlines the need for lawmakers to expedite regulatory measures for these digital assets.

Earlier this year, the payment giant launched its own fiat-backed stablecoin, dubbed PayPalUSD (PYUSD), becoming the first major U.S. financial institution to offer customers such a crypto vehicle.

The company says the primary purpose of the cryptocurrency is to facilitate payments in digital environments, particularly in the emerging Web3 landscape. Th token, which can be bought or sold on PayPal’s app or website at $1.00 per PYUSD, aims to enable direct flows to developers and enhance the user experience for online payments.

The stablecoin is fully backed by liquid assets like U.S. dollar deposits, short-term U.S. Treasurys, and cash equivalents, ensuring stability and redeemability at a 1-to-1 ratio with U.S. dollars. As an ERC-20 token issued on the Ethereum blockchain, it will allow customers to transfer the stablecoin between digital wallets. PayPal USD will be available to consumers, merchants and developers to make person-to-person payments, fund purchases at checkouts, and convert supported cryptocurrencies to and from PayPal USD.