Gu Yanxi: Talking about the integration trend of payment and transaction from the PayPal encrypted financial business


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PayPal and Paxos cooperate, or will establish a network based on cryptocurrency for payment and transactions.

Original title: “Talking about the integration of payment and transaction from PayPal’s encrypted digital financial business”
Written by: Gu Yanxi, founder of the American Liyan Consulting Company, a researcher and practitioner in the blockchain and encrypted digital asset industry

PayPal is now launching payment and trading services based on encrypted digital currencies. PayPal users can make payments and transactions in Bitcoin, Bitcoin Cash, Ethereum and Litecoin through PayPal’s payment terminals. Its first service users are US users, and it will be provided to users worldwide. During the gestating launch period, due to the very strong market demand for this, PayPal increased the amount of transactions that users can per week from 10,000 to 20,000. PayPal cooperates with Paxos to provide these encrypted digital currency transaction services, that is, PayPal users use the transaction services provided by Paxos through PayPal’s payment terminal. ItBit, an encrypted digital currency platform operated by Paxos, has a small trading volume. PayPal is cooperating with Paxos in this regard, and it is expected that the transaction volume on the itBit trading platform will increase significantly. Such a cooperation is obviously very beneficial to both parties. In terms of the development trend of blockchain and encrypted digital finance, such a cooperation is also in line with the development trend.

In the future digital financial ecosystem, the current banking and securities business will be carried out on the same financial market infrastructure, and the corresponding payment and transaction business will also be carried out in a more integrated way. Such a development trend has been recognized by the market. The most famous attempt in this regard is Bakkt. The initiators of Bakkt recognized such a development trend and tried to combine payments with transactions. Bakkt’s parent company ICE Trading Group provides Bitcoin-based derivatives trading services. At the same time, it has also formed a strategic cooperation with Starbucks, using Starbucks payment terminals to provide payment and transaction services based on encrypted digital currency. Now, the cooperation between PayPal and Paxos is also developing in this direction. PayPal is combining payment and transaction services based on encrypted digital currency through users in its payment network. Given that PayPal serves a total of 350 million retail customers worldwide, rather than serving institutional users like Bakkt, this business of PayPal will definitely quickly establish such an encrypted digital currency. Payment and transaction network. So now it seems that PayPal will realize the vision of the integration of payment and transaction faster than Bakkt.

The current launch of PayPal’s business is also very synchronized with the development trend of mainstream financial institutions in the United States. The U.S. Office of the Comptroller of the Currency is planning to launch a nationwide payment license. Such a franchise license would allow non-bank systems to provide payment services. Companies that provide such payment services will be more integrated into the mainstream US banking system. The license currently used by PayPal is a currency transfer license issued by each state. If this new nationwide payment license is established and PayPal obtains this license, then PayPal will be able to carry out payment services more effectively. In addition, the current Acting Administrator of the Office of the Comptroller of Currency is advancing the encryption and digitization of the US financial industry. The use of stablecoins is part of this process. Paxos provides a USD-based stable currency PAX. Therefore, in the future cooperation between PayPal and PAXOS, the digital dollar stable currency may become a basic part of this service. This will greatly improve the convenience of cross-border payments. PayPal has 26 million merchants using its services worldwide. The users of its services are also in many countries and regions around the world. The use of digital dollar stablecoins will definitely greatly facilitate the payment process of PayPal international users. Therefore, it is very reasonable for PayPal to choose this strategy during this period.

However, whether it is the cooperation between PayPal and Paxos or the cooperation between Bakkt and Starbucks, these cooperations are still based on a centralized system, not a distributed accounting system. Therefore, such businesses still have a lot of room for development, that is, to provide unified payment and transaction services on top of the financial infrastructure based on distributed accounting technology. In this regard, the strategy chosen by Facebook and Libra is correct.

The Libra stablecoin is controlled by the Libra Association. The Libra Association is composed of 100 members on an equal basis. These 100 members jointly decide the development direction of Libra stablecoin. Facebook participates in the Libra Association through its wallet provider Novi. Novi will provide payment services to Facebook’s social network users based on the Libra stable currency. In Libra’s network, it will also support trading services for encrypted digital assets. Therefore, Novi Wallet can obtain stable currency payment services and transaction services provided by the Libra ecosystem. Facebook uses the stablecoin and transaction services in the Libra ecosystem as a node. For Facebook users, they can easily use payment and transaction services. Therefore, in terms of strategic positioning, Facebook’s strategy is correct. It can not only make full use of the value brought by blockchain distributed accounting technology, but also make full use of its existing social network advantages. Obviously, such a development trend is very clear in the supervision of various countries, which will further encourage the regulatory agencies of various countries to adopt more reasonable supervision measures against large technology companies such as Facebook.