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[Insight] Era of Cryptocurrencies Led by PayPal

PayPal, a ‘Fintech giant’ holding more than 160 million accounts due to supports from a global online shopping mall, eBay, has sounded a challenge to the digital asset market represented by Bitcoin. This movement is not only a market advancement made by a global company but also expected to draw the dawning cryptocurrency era ever closer.

According to the official announcements or pre-announcements made by Paypal, the services they will provide can be divided into 4 main parts. Let’s check how Paypal is preparing for the upcoming cryptocurrency era, one by one.

Bringing Life to Digital Assets through Payment and Money Transfer Services

The first plan PayPal has in mind is to provide its customers who create ‘PayPal Digital Wallet’ with the service available for selling, buying, or depositing digital assets such as Bitcoin, Ether, Litecoin, and Bitcoin Cash. The service will be provided for the customers in the U.S. anytime soon. And PayPal decided that they will not charge any fee for the service until the end of the year. After examining this pilot stage in the U.S. and its result, Paypal is planning to provide the service to other customers abroad as well at the beginning of the next year. Even some are already expecting that they will takeover BitGo, a digital asset trust company.

It seems competition between Paypal and Square, one of the existing payment service providers who are already providing digital asset trade services, will bring active and public aspects to the digital asset trades. As for the Cash App, the Bitcoin trade service has been successfully launched due to the increasing trade amount of Bitcoin under the Global pandemic situation of the Covid-19. The trade amount of the Bitcoin in 2 quarters of this year only, which increased to the equivalent of USD 875 million (980 billion in KRW), is the supporting proof of the fact.

The second plan of PayPal is to provide a service that allows customers with PayPal Digital Wallet to transfer digital assets to other wallets or digital tenders, with the cooperation of its subsidiary, Venmo, which is providing the payment and money transfer service. Though the period of the service has not been confirmed, yet, but since Paypal already has Venmo, which was already providing a similar service, it will be only a matter of time if they could inspire the digital assets-trading service to some degree.

Shopping Malls Using Digital Asset Payment or Stablecoin

Thirdly, after they launch the digital asset trade and transference services, PayPal is planning to provide online shopping services with digital asset payments available. As we mentioned before, PayPal is already with more than 160 million accounts and obtaining 20 million to 30 million new accounts quarterly, thanks to the active online (non-contact) transactions due to the COVID-19 pandemic. Furthermore, more than 26 million online merchants around the world are providing payment services through PayPal. As such, if PayPal, who is with the world’s largest online merchants and accounts, is advancing for the service, it is expected that the online transactions of products through Bitcoin, Ether, or other cryptocurrencies will show a dramatic increase.

PayPal is planning to provide a purchase service through digital assets for roughly 10 percent of 26 million merchants in the following year. Recently, Dan Schulman, the CEO of PayPal, raised his voice with enthusiasm at the conference call with local media, saying, “Right now, many of the merchants are applying for our digital asset service.”

If Paypal is regarding highly of the digital asset business’s possibility, it seems possible that they will issue their own stablecoin, just like Facebook’s Libra project in progress. Currently, PayPal is in a partnership with Paxos Trust Company, which is issuing its own stablecoin called Paxos Standard Token (PAX) following the regulation by the financial authority of the New York State. Brian Kerr, CEO of Kava, that issuing a stablecoin called USDX, also made an offer to PayPal via Twitter, saying, “We can consider integrating our token into PayPal’s service.”

Making Cryptocurrencies Popular through Connection with CBDCs

The Forth and last plan of PayPal is to embrace central bank digital currencies (CBDCs) that are planned to be issued in China, the U.S., and the EU, connecting them with their own PayPal Digital Wallet. This means that Paypal intends to preoccupy the CBDC markets in China, the U.S., and other countries by using just the same way as the digital CNY, which can be usable in Alipay or WeChat pay and already under the pilot stage in several Chinese cities.

Schulman, the CEO of Paypal, declared, “We are eager to work with central banks and regulators around the world to offer our support.” If China, the U.S., and the EU issue their CBDCs, PayPal Digital Wallet will be able to exchange Bitcoins in-deposit or received through online sales directly into CBDCs, without changing them into USD or CNY. Besides, CBDC holders will also be available to sell or buy Bitcoins or make purchases from PayPal’s merchants using the deposits in their PayPal Digital Wallet accounts at any time, thus improving the utility of both digital assets and CBDCs.

In summary, PayPal’s roadmap for its digital asset business is covering all projects that major digital asset and blockchain firms have dreamed of. If PayPal can launch all the services step-by-step and able to secure enough accounts, the company will bring more competitors to the market. This will cause an exponential increase in the implementation of digital assets in the real economic sectors. Following the example of Facebook, the participation of Paypal, one of the global giants, into the market, will play a crucial part in drawing the cryptocurrencies’ popularity even further.

*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.

*The document has reflected the individual’s opinion and it may not be consistent with the company’s official point of view.

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