PayPal’s (NASDAQ:PYPL) forthcoming stablecoin launch holds promise in contrast to Facebook’s previous struggles with Libra. This potential success can be attributed to PayPal’s influential presence in Washington and the evolving comprehension of regulatory matters over the past few years.
Announcing the introduction of PayPal USD, a cryptocurrency pegged to the U.S. dollar, PayPal joins the ranks of global enterprises venturing into stablecoin territory. Notably, Facebook, now operating as Meta Platforms, took the first plunge with its Libra initiative in June 2019. Despite the uncertain climate following Facebook’s stablecoin setback, PayPal’s decision to follow suit might seem audacious, especially with its recent change in CEO and a landscape rife with crypto sector scrutiny.
However, experts, analysts, and former officials contend that PayPal possesses a more robust position compared to Facebook. The intervening years have fostered greater familiarity among policymakers with stablecoins, which are digital tokens linked to fiat currencies. This increased familiarity, coupled with a push for standardized federal regulations concerning stablecoins, has bolstered their legitimacy in the eyes of lawmakers.
Christopher Giancarlo, former chair of the U.S. Commodity Futures Trading Commission, remarked, “The world has changed dramatically since Facebook’s Libra project. There was no familiarity with stablecoins whatsoever.” He highlighted the comprehensive endeavors undertaken by the industry, which encompass lobbying as well and have played a significant role in molding public perception and fostering regulatory comprehension.
Distinct from Facebook’s history of grappling with privacy concerns and external influences like Russian election interference, PayPal maintains an established financial position in Washington. It’s worth noting that PayPal allocated $1.13 million towards federal lobbying in the preceding year, as per OpenSecrets data. This lobbying, spanning multiple years, has revolved around cryptocurrency matters, lending further credibility to its endeavors.
Isaac Boltansky, Director of Policy Research for brokerage BTIG, elucidated, “From a policy perspective, there is a seismic difference between Facebook’s Libra and PayPal’s stablecoin.” He highlighted PayPal’s clear positioning within the realm of finance, which could assuage the concerns of lawmakers regarding the separation of banking and commerce.
PayPal’s stablecoin, denoted as PayPal USD, will be issued by Paxos Trust, a digital trust company. This stablecoin will be backed by U.S. dollar deposits and U.S. Treasuries, with oversight provided by the New York State Department of Financial Services.
PayPal’s motivation for launching this stablecoin aligns with its self-perception as a leader in payment innovations. CEO Dan Schulman envisions its future utilization in transactions, although its primary usage is anticipated to revolve around U.S. customers engaging in the buying and selling of other cryptocurrencies on the platform.
While some policymakers, like Maxine Waters, express reservations, the response from Washington has been relatively subdued. Facebook’s ambitious plans to revolutionize the global financial system through its Libra project encountered vehement opposition, prompting adjustments and eventually culminating in the sale of the venture in early 2022.
The evolving landscape is marked by a more informed regulatory environment. The Federal Reserve has outlined guidelines for state banks to engage with stablecoins, and the House Financial Services Committee has moved forward with legislation aimed at enhancing the Fed’s oversight while preserving state regulators’ authority. Reflecting this sentiment, Patrick McHenry, the committee’s Republican chair, advocates swift legislative action to enable stablecoins to realize their full potential.
Featured Image: Freepik @ Marcoriveroph
Author Faith Yakubu 
