U.S. Fed's Vice Chair Barr Suggests CBDC Decision Remains a ‘Long Way’
Visa Partners with Solana and USDC Stablecoin to Enhance Global Cross-Border Payments
DAI Stablecoin Achieves Over $5 Billion Market Cap Due to Increased Yield and Elevated Spark Protocol Influence
As July drew to a close, the Republicans on the House Financial Services Committee successfully accomplished their objective of passing a bipartisan stablecoins bill. However, their departure from Washington, D.C. was marked by the absence of the comprehensive bipartisan vote that Chair Pat McHenry had diligently worked towards. The session concluded with renewed accusations stemming from longstanding disagreements, particularly concerning the extent of federal versus state regulations within a novel regulatory framework. This situation cast a somber shadow over the potential of enacting legislation that could garner support not only from McHenry, but also from Ranking Member Maxine Waters and the Biden White House.
(John Rizzo currently holds the position of Senior Vice President for Public Affairs at Clyde Group. Prior to this role, he served as the Senior Spokesperson at the U.S. Department of the Treasury, where he spearheaded the development of public affairs strategies related to digital assets, alongside other critical issues.)
Subsequently, PayPal and Paxos made an unexpected entrance into the conversation. The unexpected introduction of PYUSD could potentially act as the catalyst required to facilitate consensus in Washington D.C. and pave the way for the official establishment of a comprehensive regulatory structure for stablecoins. This development might also signify a novel and more assertive approach that American fintech firms are adopting in their interactions with the federal government and regulators in D.C.
To grasp the true significance of PYUSD's introduction, it's crucial to acknowledge its origin as a product of one of the globe's largest digital payment enterprises, renowned for its staggering 430 million user accounts. With a simple activation, hundreds of millions of individuals can seamlessly engage with stablecoins via a platform they are already well-acquainted with. This will significantly accelerate the adoption of cryptocurrencies and create a more formidable challenge in terms of regulating the ecosystem through legislative actions.
I closely witnessed the intriguing occurrence of a major player in the market venturing into a stablecoin initiative during my tenure as a senior spokesperson at the U.S. Department of the Treasury from 2021 to 2022. This period coincided with the federal government's efforts to establish a thorough regulatory structure for stablecoins, set against the backdrop of Diem, Meta's stablecoin project, facing setbacks in the summer of 2021. (At the project's announcement, it was named Libra and Meta was referred to as Facebook.)
If it had been successful, Diem would have posed two distinct challenges, openly discussed at the time, for the federal government to grapple with. The launch of Libra's stablecoin would have taken place during a period when the U.S. was lacking a comprehensive regulatory framework for stablecoins, thereby placing it in an ambiguous legal and regulatory territory. While this situation would have undoubtedly presented a dilemma for the federal government, it's worth noting that other stablecoin initiatives have also navigated this same uncertain regulatory landscape. However, what set Diem apart was the unparalleled magnitude of its regulatory predicament, owing to the instantaneous accessibility of this partially regulated, partially unregulated crypto token to Facebook's massive user base numbering in the billions.
While PayPal may not be Meta/Facebook, the potential for hundreds of millions of users to effortlessly engage with a stablecoin on a familiar and established platform introduces a fresh impetus for policymakers in Washington, D.C. to expedite a consensus on a regulatory structure for stablecoins. This imperative wasn't as pronounced back when only a few Democrats endorsed Chair McHenry's stablecoins bill.
Prior to the introduction of PYUSD, the stablecoin market maintained a relatively stable state, characterized by familiar participants and comparable levels of adoption. In the near future, a multitude of PayPal users, numbering in the hundreds of millions, will find themselves in closer proximity to a cryptocurrency asset. Washington D.C.'s democratic policymakers, who initially opposed McHenry's stablecoin bill with the intention of securing a more favorable arrangement, now need to acknowledge the potential acceleration in the adoption and utilization of stablecoins. This acceleration raises the likelihood of expedited risks, aligning with the concerns highlighted by D.C. policymakers during their evaluation of stablecoin regulations.
The unveiling of PYUSD has not only altered the legislative calculus for Democratic policymakers, but it has also brought about a shift in the regulatory considerations. This change could potentially mark the beginning of a fresh chapter in the way American participants in the cryptocurrency market interact with the District of Columbia.
As per reports, prior to initiating its token, the supporters of Libra's stablecoin project actively pursued the endorsement of policymakers in Washington, D.C. This strategy appeared logical at first glance. Unlike the realm of transportation policy, where Uber and Lyft demonstrated that change can be driven through determination and widespread adoption, financial services are subject to rigorous federal regulations. Attempting to introduce innovative financial policies without the prior consent of regulatory authorities can be a formidable task, unless one operates within the domain of financial services predominantly governed by state-level regulations.
That's the secret weapon PayPal holds. It's the driving force behind its ability to form a partnership with Paxos Trust and revolutionize the group of potential stablecoin users almost instantly. PayPal's primary operation, which involves money transmission, is subject to regulation through individual state licenses. This implies that the federal government's capacity to levy charges on backers of PYUSD for introducing a stablecoin without prior endorsement is restricted.
The lobbying tactics employed by PYUSD could signal a fresh direction for American cryptocurrency firms in Washington, D.C. Rather than seeking mere authorization, they are asserting their right to a prominent role in discussions and are accompanied by potentially hundreds of millions of users. This user base stands to accelerate the adoption of cryptocurrencies and integrate stablecoins into the fabric of everyday economic activities.
"Achieving a result in D.C. is not always about winning the competition of ideas. Instead, influencing policy is about power and leverage"
After closely witnessing the dynamics of power during 14 years of working within the federal government, spanning both Congress and a presidential administration, it has become evident that achieving success in Washington, D.C. doesn't solely hinge on winning the battle of ideas. Rather, shaping policies revolves around the concepts of power and influence. Frequently, it is the individuals wielding power who manage to steer outcomes in D.C., while those lacking it often find their efforts falling short.
Backers of stablecoins and participants in the market now wield increased influence over the federal government, encompassing both regulators and legislators, in a manner that was non-existent mere weeks ago. This newfound influence could pave the way for the establishment of a comprehensive regulatory framework for stablecoins within Congress, initiating a phase wherein American crypto enterprises compel the federal government to engage with them based on their own conditions.
