The adoption of stablecoins is a topic that has gained vast traction in recent weeks. This is reflected by PayPal‘s recent launch of its stablecoin, PYUSD, under the regulatory framework of the New York Department of Financial Services. A move seen as precocious by some, such as Rep. Maxine Waters (D-CA), given the lack of federal legislation directly addressing these digital financial instruments.
Recalling past events, the launch is likened to Meta‘s (formerly Facebook) unsuccessful attempt to introduce Libra, a basket-based stablecoin which, eventually succumbed to global regulatory scrutiny. However, the two instances, albeit similar in nature, occur in different circumstances.
On one hand, criticism against Meta’s project converged from both sides of the aisle, largely due to concerns about the company’s data privacy practices. In contrast, the contemporary scene shows the stablecoin industry garnering support from Congress, albeit mostly from one side. This resulted in a bill focusing on stablecoins clearing the House Financial Services Committee, despite strong opposition from Waters and other Democrats.
On the other hand, PayPal’s launch has overridden the prospects of this bill passing through the Senate. It is believed that the company’s move, which some see as pre-emptive, will solidify the views of the Democratic party’s anti-crypto advocates in the Senate, like Sen. Elizabeth Warren (D-MA). Considering the majority of the Senate belongs to Warren’s party, the bill may face significant obstacles.
Nevertheless, PayPal’s project seems to have a more favourable position politically, compared to Libra. Institutional initiatives from companies like BlackRock, Fidelity, Invesco and others have also geared towards persuading policymakers to back their own interests in the crypto industry.
Indeed, crypto debates have become politicized and polarized. However, the increasing number of Democrats voicing support for crypto-based bills suggests a lower risk of stalemate. Paired with support from influential corporations, this gives hope to the firm establishment of cryptocurrencies in the financial industry.
An additional point favouring PayPal is that, unlike Meta’s Libra, it offers a dollar-only stablecoin. Many policymakers saw Libra’s multicurrency concept as a threat to monetary sovereignty. The demand for domestic currencies could have been lessened if Meta’s enormous user base converted to using the token, pushing up the demand for the dollar.
While Democratic resistance may delay legislation, the advent of a stable regulatory framework for stablecoins in the U.S. seems imminent. Such developments can instigate monumental changes in money, with both newcomers like PayPal and veterans like Tether and Circle ready to leverage this potential transformation.
Source: Coindesk
