72 hours to land on the beach, analyze PayPal’s “encryption plan”


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Author: Zhang Juan change

Although the U.S. stock market’s third-quarter earnings season is gradually reaching a climax, the payment giant PayPal stole the limelight this week with its “sudden attack” on the cryptocurrency market. On Wednesday (October 21), the announcement of PayPal’s direct entry into the cryptocurrency market directly pushed Bitcoin to a new high in the past 15 months and drove the company’s stock price to rise by nearly 5% in just 48 hours. Today (October 23) ) It was revealed that it was negotiating to acquire a number of crypto companies including BitGo, a crypto custody service company. PayPal’s ambitions in the encryption field are fully revealed.

People familiar with the matter said, “PayPal has been in talks with BitGo recently, and a deal may be concluded within a few weeks. However, negotiations may still break down and PayPal may choose to purchase other targets.” BitGo was established in 2013 and sold for 170 million yuan in 2018. The USD valuation raised USD 58.5 million, and Goldman Sachs and Galaxy Digital Ventures both participated in the investment.

In this regard, Adam Cochran, a partner of venture capital firm Cinneamhain Ventures, tweeted that he has confirmed through multiple sources that PayPal has negotiated with more than a dozen crypto companies. These companies are not only custodial services, but also companies involved in payment processing, regional payments, and smart contracts and tokens. Adam Cochran further pointed out that PayPal’s move to support cryptocurrency services and consider the acquisition of BitGo is of great significance. All of us have underestimated their emphasis on this field and the progress of exploration. This may lead us into the golden age of crypto mergers and acquisitions. Technology brings hundreds of millions of users and institutions.

Undoubtedly, PayPal’s recent actions are not only a long-term benefit for the cryptocurrency field, but also have earned enough attention in the traditional financial market. What exactly is PayPal’s cryptocurrency service? How did the market react to PayPal’s entry? To what extent can PayPal promote the adoption of cryptocurrencies? Let’s first understand the payment giant’s “crypto plan” through PayPal’s official announcement and terms of service, as well as its progress in blockchain and cryptocurrency.

PayPal officially announced that it supports encryption services

On October 21, PayPal stated in it that taking into account the new crown pneumonia and the surge of interest in digital currencies by the central bank and consumers, the acceleration of digital payment and digital transformation is particularly urgent. To this end, it will launch a new service that allows users The ability to buy, sell, and hold cryptocurrency directly from a PayPal account will also allow users to use cryptocurrency to settle purchases at 26 million merchants on the platform. This service is provided by the company in cooperation with Paxos Trust Company, a supplier of compliant virtual currency products and services. In addition, through Paxos, PayPal has obtained the first virtual asset limited license from the New York State Department of Financial Services .

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PayPal stated that the service will be open to US PayPal account holders in the next few weeks, and will support four types of encryption: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC) at the beginning of the launch. currency.

72 小时抢滩登陆,解析 PayPal 的「加密大计」

In addition, PayPal plans to extend this feature to its mobile payment application Venmo and the international market in the first half of 2021. From 2021, PayPal users will be able to use cryptocurrency to settle purchases at 26 million merchants on the platform, and can also convert their selected cryptocurrency balance into legal tender in real time. All transactions will be settled at PayPal’s real-time exchange rate.

In order to promote the popularity and adoption rate, PayPal also provides cryptocurrency-related educational content to help users understand the cryptocurrency ecosystem and the risks and opportunities of investing in cryptocurrencies. Before December 31, 2020, there will be no service fee when buying or selling cryptocurrency on PayPal.

Explain the PayPal cryptocurrency terms of service

When announcing the launch of the cryptocurrency service, PayPal also disclosed relevant terms and users, which came into effect on October 21. The main points of the terms are as follows:

  • Users can buy, sell and hold cryptocurrencies by establishing their own Cryptocurrencies Hub. Before the first visit, you must verify the name, residential address, birthday, and taxpayer identification number .
  • PayPal will automatically link the user’s Cryptocurrencies Hub to the user’s personal PayPal account.
  • PayPal will only show users its crypto asset balance , not real crypto assets.
  • All custody and transactions of encrypted assets are performed by Paxos Trust Company and other service providers that may be determined later.
  • The gains or losses incurred when users sell encrypted assets may affect their tax situation.
  • Currently, you can not encrypt the transfer of assets to other accounts outside the Paypal system or the system can not use encryption assets to pay for goods or services.
  • Users can purchase cryptocurrency through the cash balance in the PayPal account and the bank card and debit card linked by the user, but other credit products such as credit cards are currently not supported.
  • When a user buys or sells an encrypted asset, PayPal will charge the difference , that is, the difference between the quote received by the transaction service provider and the exchange rate between the U.S. dollar and the encrypted asset displayed to the user. In addition, PayPal will also charge users a fee.
  • The weekly purchase limit is $10,000, and the rolling annual purchase limit is $50,000. This limit may be changed later.
  • Don’t use fraudulent funds to buy cryptocurrency.

72 小时抢滩登陆,解析 PayPal 的「加密大计」

In response to this clause, cryptocurrency analyst Plan B stated, “PayPal may buy Bitcoin to hedge their risks. But PayPal customers will not essentially buy, hold or sell Bitcoin. They will own PayPal’s Bitcoin IOU. “Twitter netizen Robert Sharratt said that the biggest impact of PayPal’s payment cryptocurrency service is not its acceptance of bitcoin purchases, but the ability to enable 26 million merchants to accept bitcoin .

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PayPal’s involvement in the blockchain and digital currency field

In fact, PayPal started the field of community cryptocurrency and blockchain six years ago. PayPal also pointed out in the statement that in the past five years, PayPal has explored the potential of digital currencies through cooperation with regulated cryptocurrency platforms and central banks around the world. Through its internal blockchain research team, PayPal continues to explore the research on the new generation of digital financial service infrastructure and digital commerce.

As early as September 2014, CNN reported that PayPal has established partnerships with BitPay, Coinbase, and GoCoin. Merchants who use PayPal for transactions on eBay can accept Bitcoin payments from customers.

In 2019, PayPal Ventures, a venture capital arm of PayPal, also invested in TRM Labs, a cryptocurrency risk management platform, and Cambridge Blockchain, a blockchain-based identity management and compliance software company. TRM Labs is a platform designed to help global financial institutions monitor and prevent cryptocurrency fraud.

Last year PayPal also participated in the launch of Facebook’s stable currency Libra project and became a member of the Libra agreement. However, due to regulatory and censorship pressure, PayPal later withdrew from the project.

In fact, the news that PayPal supports cryptocurrency services is not groundless. In March this year, PayPal stated in a letter to the European Commission that PayPal is monitoring the development of the field of encrypted assets and has taken unilateral and practical steps to further develop its capabilities in this field. In June, sources PayPal and Venmo will provide users with cryptocurrency storage services through a built-in wallet function, and allow users to buy and sell cryptocurrencies directly on PayPal and Venmo.

When talking about the company’s development in the field of digital currency, PayPal CEO Dan Schulman said that the digitalization of currency has obvious advantages in financial inclusion and payment efficiency. PayPal services are global, and it is very professional in the field of digital payment, and has a bilateral network composed of consumers and merchants and strict security and compliance control mechanisms, which will help promote these new transaction tools to be understood and used by people. PayPal hopes to cooperate with central banks and regulatory agencies around the world, and will promote the development of digital currency in global commercial finance, and provide users with faster, safer, and cheaper financial services.

If PayPal acquires BitGo, what impact will it have on the crypto market?

On the other hand, the news that PayPal may acquire BitGo quickly ignited the crypto community and social media. The following are the views of Twitter netizens compiled by Chain Wen regarding this potential acquisition.

Positive views :

  • Help drive the adoption rate of cryptocurrencies such as Bitcoin.
  • It will push the encryption field to the mainstream financial field.
  • Being extremely bullish on Bitcoin may drive the price of Bitcoin to soar.
  • Attract more traditional financial institutions into the game.
  • Help connect the encryption industry and the financial industry.
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Negative views :

  • This is the worst thing in the Bitcoin ecosystem and may destroy Bitcoin.
  • It may make Wrapped Bitcoin (WBTC), the anchored Bitcoin asset, become centralized.
  • The PayPal encryption service is highly centralized and lacks flexibility.
  • Users need to pay taxes for the purchase and sale of encrypted assets. Due to the high volatility of encrypted assets and the lack of clarity in the taxation system for encrypted assets, a “tax nightmare” may be triggered.

PayPal’s running entry, where will the story lead?

After PayPal issued a statement supporting encryption services, Paxos Trust Company CEO and co-founder Charles Cascarilla responded, “PayPal’s entry will have an unprecedented impact on the PayPal community, the cryptocurrency industry, and Paxos. PayPal has 346 million active players worldwide. Accounts (including more than 26 million merchants) will significantly increase the adoption and scale of cryptocurrency in the next few years.”

According to a cryptographic research report released by Cambridge University’s Judge Business School in September this year, as of the third quarter of 2020, there were 101 million real users out of the 191 million accounts opened among surveyed service providers. The 346 million users of PayPal are more than three times the current real users in the crypto market. It is conceivable that PayPal’s move is expected to significantly increase the adoption rate of cryptocurrencies in the next few years.

CoinCorner CEO Danny Scott also said, “For PayPal, this is just the first step. From the outside of the industry, this is beneficial to the reputation of Bitcoin, but from the inside of the industry, this is just another provider of risk. Companies that are exposed and do not allow sending and receiving and withdrawals. Of course, this is against the concept of Bitcoin, but this is a potential step in the right direction.”

PayPal’s development in the field of cryptocurrency has also triggered market speculation about its launch of stablecoins. CSO Meltem Demirors of CoinShares, a cryptocurrency asset management company, predicts that after the Libra Association, PayPal may launch its own stablecoin.

In addition to PayPal, some mainstream financial technology companies have previously allowed users to buy and sell bitcoin, such as the payment platform Square founded by Twitter CEO Jack Dorsey and the stock trading platform Robinhood, and these companies also use their bitcoin services. Obtained considerable returns. In the second quarter of 2020, Square achieved USD 875 million in Bitcoin revenue and USD 17 million in Bitcoin gross profit through its Cash APP service, up 600% and 711% year-on-year respectively.

It is conceivable that the entry of PayPal will not only indirectly provide cryptocurrency purchase and sale services for its more than 300 million users, enable 26 million merchants to accept Bitcoin, but also become a bridge and hub connecting the crypto industry and the traditional financial industry, pushing the crypto industry To the mainstream.