Fintech company PayPal (NASDAQ:PYPL), which recently launched its own stablecoin, PayPal USD (PYUSD), has drawn the ire of the House Financial Services Committee. The committee’s senior Democrat, Congresswoman Rep. Maxime Waters, has expressed concerns about PayPal’s decision to introduce the stablecoin before having the necessary legislation in place. Following the news, PYPL stock fell 1.9%.
What are Stablecoins?
Stablecoins are a form of cryptocurrency that is usually pegged against a commodity or a fiat currency. These coins are considered relatively “stable” in terms of price fluctuations as compared to dealing in cryptocurrencies. However, factors such as market dynamics, regulatory overhauls, and a drastic change in the underlying currency can make stablecoins volatile. If a stablecoin loses its 1:1 peg against the underlying currency, it could result in mass withdrawals of money, endangering the financial system.
PYUSD is a U.S. dollar-denominated stablecoin. This stablecoin will be redeemable in the ratio of 1:1 for U.S. dollars and is issued by Paxos Trust Company.
Lawmakers Highlight Concerns for PYUSD
Waters is “deeply concerned” about PYUSD since it comes without any Federal legislation and has the capability to destroy its users and hamper financial stability. The concern is more significant for PayPal due to its substantial user base within the industry. PayPal boasts about 435 million customers worldwide, much wider than some of the “megabanks,” Waters added. Having said that, PayPal’s stablecoin will be available only to its U.S. customers currently, reducing the number of coins in circulation and their reach.
Other Democratic lawmakers echo similar sentiments with Waters and have collectively flagged concerns related to money laundering, privacy, and consumer protection. The Congresswoman is also agitated by the advancement of a Republican bill that supports the issuance of stablecoins, including PayPal’s. She has called the committee to bring the bill for negotiation and has serious doubts about its passing as law in its current form.
What is the Future of PYPL Stock?
Following PayPal’s Q2 report released on August 2, several analysts lowered their price targets on PYPL stock since the company reported a decline in active accounts. PayPal’s earnings came in line while revenues beat expectations on the heels of a strong quarter registered by its Venmo business.
Overall, out of the 21 top analysts who recently rated PayPal stock, 14 have given it a Buy rating while seven have given it a Hold rating. Top Wall Street analysts are those awarded more stars by TipRanks’ Star Ranking System. This is based on an analyst’s success rate, average return per rating, and statistical significance (number of ratings).
Based on these top analysts’ reviews, PYPL has a Moderate Buy consensus rating on TipRanks. The average PayPal price target of $87.79 implies 41.6% upside potential from current levels. Meanwhile, PYPL stock has lost 16.8% so far in 2023.
