How PayPal Upended the Crypto Debate in Washington D.C.

As the end of July arrived, House Financial Services Committee Republicans achieved its goal of passing a bipartisan stablecoins bill. Still, they left D.C. without the broad bipartisan vote Chair Pat McHenry had labored to achieve. The session ended with new recriminations over old disputes, namely the degree of federal vs. state regulation in a new regulatory framework, casting a dark cloud over the prospect of legislation that could garner support from McHenry, Ranking Member Maxine Waters, and the Biden White House.

John Rizzo is Senior Vice President for Public Affairs at Clyde Group. Rizzo most recently served as the Senior Spokesperson at the U.S. Department of the Treasury where he led public affairs strategy on digital assets, among other issues.

And then PayPal and Paxos entered the chat. The surprise unveiling of PYUSD may be the accelerant needed to forge compromise in D.C. and bring about the legal enshrinement of a comprehensive regulatory framework for stablecoins. It may also represent a new, more aggressive strategy for how American fintech companies deal with the federal government and D.C. regulators.

To understand why PYUSD’s launch is so monumental, one must recognize that it comes from one of the world’s largest digital payment companies, which boasts 430 million accounts. With the flip of a switch, hundreds of millions of users can access and transact in stablecoins through a service with which they are already familiar. It will speed up crypto adoption and make the ecosystem more challenging to bring to heel through Congressional action.

The prospect of a significant market participant exploring a stablecoin project is a dynamic I observed up close while serving as a senior spokesperson at the U.S. Department of the Treasury in 2021 and 2022. Those years saw the federal government attempting to implement a comprehensive regulatory framework for stablecoins in the backdrop of Diem, Meta’s stablecoin project’s failure during the summer of 2021 (when it was announced, the project was known as Libra and Meta was called Facebook).

Read more: David Z. Morris – PayPal’s Real Stablecoin Strategy: It Wants to Earn Interest on Your Deposits

Had it succeeded, Diem would have presented two challenges, which were discussed publicly at the time, for the federal…