PayPal’s rumored plans to offer cryptocurrency purchases to its hundreds of millions of users appear to be gathering pace in what could be the latest example of a growing trend—fear of missing out on digital assets by traditional financial institutions.
According to a CoinDesk report on 20 July, the payments giant is entering into a partnership with the Paxos Trust Company—and an official announcement could come as soon as this week.
Last week, Paxos announced that it was launching a crypto brokerage that would enable companies to integrate digital assets into their own applications—giving users the freedom to buy, sell, hold and send virtual currencies with ease.
Revolut US was the first company to be unveiled as a partner of the Paxos Crypto Brokerage. Under this arrangement, Paxos takes custody of all crypto assets on behalf of users and provides liquidity to ensure trading prices are competitive. An API-based solution means that Revolut continues to control the user experience.
PayPal using this brokerage would potentially remove a significant barrier to entry for the eCommerce market leader, as Paxos would end up handling regulatory complexities on its behalf.
When the Paxos Crypto Brokerage was unveiled on July 15, the company’s CEO Charles Cascarilla said: “The digital asset revolution has started and more and more companies like Revolut see it coming. With Paxos Crypto Brokerage, companies can leverage our expertise and regulatory compliance to easily and securely integrate crypto into their applications. We’re proud to offer financial market infrastructure that supports an open, digital financial future.”
Institutional FOMO?
PayPal’s eagerness to hop on board the Bitcoin bus may well be linked to fears set out in the company’s annual report, which was filed with the U.S. Securities and Exchange Commission back in December.
“If we cannot keep pace with rapid technological developments to provide new and innovative products and services, the use of our products and services and, consequently, our revenues could decline,” that document said.
Developments in “virtual currencies including distributed ledger and blockchain technologies” were among the factors listed.
“The news offers another affirmation that traditional payment players can no longer ignore the potential business opportunity presented by crypto, and are now even willing to risk disrupting their own fiat-based platforms,” said Seamus Donoghue, vice president of Metaco, a provider of secure infrastructure for financial institutions entering the digital asset business.
“In 2017, retail fear of missing out was the theme that drove BTC towards $20,000,” he added in a press release last month. “The interesting question now is: Are we on the edge of an institutional fear of missing out that could bring crypto into the mainstream?”
Is a PayPal announcement imminent?
Speculation that PayPal was about to wade into the crypto space first emerged back in June. Although the company has remained tight-lipped about whether the rumors are true, job vacancies for blockchain experts have been regularly popping up on its careers site.
If confirmed, this would be a major U-turn for the fintech giant, not least because PayPal CEO Daniel Schulman has long warned that rampant volatility in the crypto markets makes digital assets impractical for everyday purchases.
Last month, NEM blockchain’s head of trading Nicholas Pelecanos told Modern Consensus that PayPal listing Bitcoin would be a “huge nod to mainstream adoption,” adding: “All in all, pending the validity of this event, I can see it starting a move to $13,000 or higher.”
Given how Bitcoin has been trading in an unusually tight corridor of late, with little in the way of volatility, a PayPal announcement could help the cryptocurrency uncouple from the S&P 500 and return to bullish territory.
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