U.S. payment giant Paypal Holdings Inc (PYPL.O) announced its entry into the cryptocurrency market on October 21, Beijing time. Reuters was the first to report PayPal’s entry into cryptocurrency. After that, the company issued a press release providing more information.
·Paxos Crypto Brokerage will assist PayPal’s digital encryption currency to improve its functions;
·The encrypted digital currency service will support Bitcoin, Ethereum, Bitcoin Cash and Litecoin;
PayPal users in the United States will be the first to open the service in the “coming weeks”, and plans to extend the service to Venmo account holders and international users to open cryptocurrency payment channels in 2021.
· Next year PayPal will open encrypted payments to its 26 million merchants.
Stimulated by this news, the price of Bitcoin jumped from US$12,500 to nearly US$13,200 within one day. Although it fell back later, it rose by more than 5% within the day. PayPal’s stock price also rose by nearly 6% to over $215.
In fact, as early as some time ago, the US listed company MicroStrategy bought nearly 40,000 BTC, which was worth $425 million at that time. The addition of PayPal to the field of digital encryption currency will undoubtedly inject a calming agent into other technology companies, which also shows that the institution’s demand for Bitcoin has risen significantly, and encryption technology is being examined more than ever.
Let’s take a look at how foreign bigwigs analyze PayPal news, and correspondingly there is no shortage of comment highlights:
Chamath Palihapitiya, CEO of Social Capital and chairman of Virgin Galactic, said: “After PayPal’s press release, major banks are meeting to discuss how to support Bitcoin, and it is no longer a dispensable role.”
Tyler Winklevoss, co-founder and CEO of Gemini, said: “PayPal is an important bridge between the mainstream financial market and crypto islands. Traditional finance is changing, and this is the infrastructure that helps achieve this goal.”
Mike Novogratz, CEO of Galaxy Digital, said: “This PayPal news is the biggest news in this year’s crypto field. Now all banks will start a competition to serve crypto technology.”
CoinShares CSO Meltem Demirors said: “The most exciting thing is PayPal’s Venmo, which has 300 million active users. They are millennials, and they are the target audience for Bitcoin.”
Critical thinking under PayPal
In the second quarter of 2020, PayPal’s transaction volume exceeded $221 billion. This represents a 10% increase in transaction volume in just six months. PayPal is dominating online payments and services such as credit and insurance. But from the search website, PayPal has long been infamous for freezing user funds and reviewing payment methods that conflict with its business philosophy. Will there really be any changes to the digital encryption currency that PayPal enters this time?
Is PayPal good news for Bitcoin?
I don’t know if you have noticed, PayPal has been opposed to the digital encryption economy. Former PayPal CEO Bill Harris wrote in 2018 that Bitcoin is the “biggest scam in history”. This 180-degree shift in attitude is indeed surprising.
Giant companies like PayPal may not want to promote the development of the crypto economy when they start bitcoin transactions. After carefully reading the press release on the addition of cryptocurrency, PayPal gave an ambiguous message. On the one hand, the service is fully managed, does this mean that the user does not have a private key. On the other hand, PayPal intends to provide educational content for account holders to help understand the cryptocurrency ecosystem, so that everyone who knows Bitcoin agrees not to hold private keys. This kind of thinking may indicate that this kind of promotional content will downplay the basic rule of “Not your keys, not your coins” in the circle.
In addition, if millions of new users purchase bitcoins through PayPal transactions, there may be a very serious information gap that undermines the user experience and cryptocurrency principles. This statement in the PayPal FAQ is actually wrong: “You own the cryptocurrency on PayPal, but you don’t have a private key.” No one should treat funds held entirely by a third party as their own. For some people, the advantage of this is that there are strict regulatory commitments, funds can be guaranteed, and new users may feel more comfortable than dealing directly with cryptocurrency exchanges, but at the cost of restricted digital currencies.
Can PayPal become a leader in cryptocurrency?
Cryptocurrency shopping does not mean that cryptocurrency can be directly used as a payment tool, but that users need to convert it into legal currency. PayPal stated that when users use the cryptocurrency in their account to make purchases in the future, the system will convert the cryptocurrency selected by the user into legal currency at the PayPal rate at the time. Since the transaction is still conducted in legal currency, merchants do not need to bear other costs.
In other words, what merchants ultimately receive is legal currency, not cryptocurrency as a payment method. PayPal only serves as a conversion platform between merchants and users.
As PayPal enters the forefront of encrypted digital, it will be closely watched by companies, institutions and consumers. Although PayPal can call itself a “digital payment expert”, it has always taken a negative stance on users who purchase cryptocurrencies on digital currency exchanges. Quoting the PayPal user acceptance policy, transactions that “involve currency transactions or check cashing operations” are prohibited.
In fact, this clause still exists, indicating that PayPal intends to restrict users to only use the platform to trade cryptocurrencies, stifle competition, and prevent users from withdrawing cryptocurrencies to wallets where users can control their private keys. Nevertheless, PayPal stated that it will “open up 26 million merchants with encrypted payments”, which is worthy of recognition. Currently, the choice of cryptocurrency funds is still in its infancy, and Bitcoin lending may grow in the future.
The biggest risk of PayPal is that PayPal’s influence in the field of traditional electronic payments will be interpreted as expertise in the field of encryption. This will threaten the voices of the crypto community, and these voices may be misinterpreted by PayPal in the field. At present, no one can know what the result will be, but there are still many problems to be solved before users turn to PayPal.
in conclusion
In short, welcome PayPal with open arms, but we must never hope that PayPal will play an absolute leadership role. PayPal has made concessions to Bitcoin, and many other aspiring educational projects in the community should also be taken seriously to prevent new users from falling into the biggest trap of trusting Bitcoin. Judging from this announcement, whether PayPal Bitcoin can work is still debatable.
