Is Paypal making a move into crypto?
PayPal is one of the most widely used payment platforms in the world. It is well known, secure, fast and very easy to use. There's no need to link your bank account - you can link it to your credit card. PayPal has payment protection as well, which makes it easy to recover 'stolen' or 'scammed' funds from other people.
Recently, PayPal announced that it would be looking into possible developments in cryptocurrencies, or it calls them - 'crypto-assets'.
PayPal with Paxos?
CoinDesk has stated that crypto start-up Paxos, famed for its stablecoin PAX, will serve as PayPal's supplier. An official announcement is expected in the next few days.
Launched in July 2020, Paxos Crypto Brokerage has already succeeded in securing the business of challenger bank Revolut's US branch. Following the partnership, Paxos CEO Charles Cascarilla noted that the brokerage service could prove "a major tipping point for the adoption of cryptocurrency."
It is very likely that PayPal will be able to sell PAX if the Paxos-PayPal partnership goes through.
PayPal's Community Letter
In a leter shared on its community website, the payment platform noted :
“As an innovative FinTech company and by virtue of its mission, PayPal is monitoring the evolution of the crypto-asset space.”
The letter detailed that PayPal initiated its development in the crypto area since last year when it joined the Libra Association as a member. Paypal was also the first company to quit the consortium. It was followed by Mastercard, Visa, and others. This statement was given out when PayPal exited the Libra Association :
“PayPal has taken unilateral and tangible steps to further develop its capabilities in this area, and therefore – without questioning the value of the project – took the decision not to participate in the Libra Association and to continue to focus on advancing our existing mission and business priorities to democratize access to financial services."
It is certain that PayPal was considering adding Bitcoin buying and selling options directly to its customers. In Europe, Paypal has a massive presence. With a license in Luxembourg, the company has operations in 31 European jurisdictions, serving around 95 million merchants and consumers.
Further in the letter they state:
“PayPal is continuously monitoring and evaluating global developments in the crypto and blockchain/distributed ledger space. ... PayPal would be supportive of a harmonized approach across EU markets on applicable licensing or authorization requirements.”
Analysis of the news
Suggestions were made that the EU should make clearer definitions for crypto assets, including licensing. This would regulate companies very well. The regulator was also asked to bring crypto-activity under AML/CFT requirements.
“The regulatory framework should allow for innovative products and services to be brought to market without undue regulatory burden while simultaneously providing regulatory clarity, guidance, and safeguards.”
The advantages of this move include making cryptocurrency available to almost 325 million people globally, with a safe, reliable and trusted payment platform. This would make investing easier, and possibly induce more people use PayPal instead of Skrill, Stripe and the like.
However, this move is detrimental to cryptocurrency. PayPal will always seek buyer protection - meaning that transactions could possibly be reversed! This is disastrous, as the anonymous nature of cryptocurrency is lost.
PayPal is able to track locations of its users. Normally, this is only used when state or federal laws have been broken. But allowing people to purchase cryptocurrency via PayPal would jeopardize the locations of the users, meaning that both the parties (buyer and seller) could be traced. This is a major blow to all forms of cryptocurrency, and obviously people will not buy crypto via PayPal if their location is compromised.
PayPal is not a decentralised platform - the money in your account is subject to country laws. Then wouldn't the purchased crypto be subject to the same laws? It might even be made taxable, which is another big blow.
It seems as if PayPal is so focused on making the process easier that they've forgotten the spirit of cryptocurrency - anonymity, responsibility and control.
When will PayPal adopt crypto?
Not this year. PayPal doesn't hold a bit-license, so it can't sell Bitcoin. However, the company may move towards cheaply 'mining' crypto from third parties and selling it to the people. This wouldn't break any laws, and still help them earn a considerable amount. Sites like Honeyminer are willing to sell Hash at a cheaper price. With the right vectors pointing in a direction, PayPal can still 'sell' Bitcoin to people without breaking any laws.
The time frame is around two years for the big event, and it probably won't happen in three years either. This is the correct time to be investing in crypto. If (and that's one big if) PayPal decides to sell 'crypto-assets' it makes sense that they will buy it as well - more in storage is always a good thing.
There is a large gray area around a possible entry for Paypal into crypto - including the legalese. For example, would PAX bought via PayPal be taxable? PayPal's records are open-booked for the governement, so each and every satoshi bought would be visible - including time of purchase, buyer and price as well as location. If that would be the case, why would someone use PayPal? They would still use other forms of payment to buy crypto - which would have lower fees, be anonymous and safe.