Key Democratic lawmakers said Wednesday that PayPal’s decision to launch a stablecoin before the government establishes regulations for such assets could put consumers' money at risk.
“As we’ve seen with other so-called stablecoins, digital assets that purport to be ‘stable’ can quickly become worthless," said Sen. Sherrod Brown (D., Ohio), head of the Senate Banking Committee, in a statement.
Rep. Maxine Waters (D., Calif.), the top Democrat on the House Financial Services Committee, said earlier she was “deeply concerned” with PayPal’s plan in the absence of federal oversight of stablecoins. Waters also criticized Republicans on the committee for advancing a stablecoin bill last month without her support and urged them to come back to the negotiating table.
U.S. policy makers’ have worried for years that dollar-based stablecoins could threaten the financial system if they lose their 1-to-1 peg to the greenback, prompting investors to demand their money back en masse. Lawmakers have also voiced concerns related to money laundering, privacy and consumer protection.
PayPal’s size could subject it to heightened scrutiny from lawmakers and regulators. With 435 million active accounts, the company is far bigger than either of the major existing stablecoin issuers, Tether and Circle.
Owing partly to the breadth of its platform, Facebook experienced immediate pushback after it announced plans to launch a stablecoin dubbed Libra in 2019. That project was rebranded as Diem and eventually sold to Silvergate, which shut down earlier this year.