Partnered With:

Will PayPal, the payment giant that has entered the cryptocurrency market, support DCEP?

Read this article in 19 Minutes

Payments giant PayPal has finally launched its own cryptocurrency service.

Author: 0x33, Rhythm BlockBeats

22 years, a market value of 250 billion US dollars, business in more than 200 countries and regions around the world, and nearly 250 million daily active users Users, 26 million merchants, these labels outline PayPal, a company that almost everyone knows. And the world's leading payment giant detonated the currency circle with an announcement.

On October 21, PayPal officially stated that it will allow users to use PayPal accounts to trade cryptocurrencies such as Bitcoin. The official pinned the announcement on Twitter, announcing the latest service to its 660,000 Twitter followers.

PayPal Receives First Conditional Cryptocurrency License From New York State Department of Financial Services, Through Paxos Trust Company, PayPal Users Can Buy BTC Directly From Wallets ;, ETH, BCH and LTC and other current most mainstream cryptocurrencies.

Integrated with encryption companies in 2014, allowing users to use BTC as an online shopping payment method, and now directly conduct cryptocurrency transactions through PayPal wallets. After 6 years, PayPal finally opened its own cryptocurrency service.

PayPal's Encryption Road

In December 1998, Peter Thiel and 4 partners jointly Created this payment giant that later influenced the world. Peter himself was later regarded as one of the top venture capitalists in Silicon Valley. In addition to PayPal, he also won a 10% stake in Facebook in 2004. Top companies and projects in the currency circle such as Bitmain and EOS are also in his in the portfolio.

Compared to the traditional mailing of checks or remittances, PayPal, which allows users to use emails to identify their identities, shines brightly. popular in the market. In the past 22 years, PayPal's mobile payment market share in the United States has soared and is far ahead of its competitors. If Amazon is not counted (Amazon has its own payment method: Amazon Pay), 77% of the top 500 online retail companies in the United States % used PayPal to pay, and the market value has risen from 50 billion US dollars in 2015 to 250 billion US dollars.

Maybe many people don’t know that PayPal started contacting the cryptocurrency field 6 years ago, but the process was not smooth.

On September 23, 2014, PayPal cooperated with BitPay, Coinbase, and GoCoin to allow eBay users to use BTC as a payment method through PayPal.

Unfortunately, in less than a year, due to the fact that crypto transactions are often fraudulent and even have transaction chargebacks, PayPal cut off the business related to cryptocurrencies and "actively froze any transactions related to crypto." currency-related accounts".

However, PayPal has always had an encryption dream.

At the World Economic Forum in 2019, PayPal co-founder Luke Nosek said: "A lot of people don't know this. , PayPal’s original mission was to build a global currency free from the intervention of corrupt banks and governments that devalue the currency.” This description can’t help but make people sigh, Luke Nosek (Luke Nosek) is not talking about Bitcoin coin? But there is only one bitcoin in the world, and it may be difficult for PayPal to create another bitcoin.

On June 18, 2019, Facebook launched its own encrypted stable currency Libra. Among the 29 members of the initially confirmed Libra Association, PayPal figure.

Rhythm guessed at the time that if Libra is successfully launched, the future scenario should be that users can directly buy Libra stablecoins, and then pay through channels such as Facebook or Paypal. The first batch of members covers almost all payment scenarios , shopping, investing, recharging phone bills, taking taxis, etc. Libra's vision is similar to PayPal's original mission, and Libra has given PayPal new hope.

However, although the vision is strong, the development of the Libra Association and Facebook has not been smooth. Under the pressure of multi-national regulation, members of several associations announced their withdrawal one after another.

On October 5, 2019, PayPal officially withdrew from the Libra Association, becoming the first giant to leave the Libra Association. Regarding this decision, PayPal CTO Sri Shivananda explained that PayPal believes that in the short to medium term, Libra's idea of "serving payment needs who have not yet connected to the system" cannot be realized.

The failure to realize the vision of first exposure to cryptocurrency did not seem to shake PayPal's determination to enter the crypto market. In public, Sri Shivananda has repeatedly stated that the digitization of money is inevitable. On September 21 this year, the cryptocurrency trading platform bitFlyer Europe integrated PayPal, becoming the first encrypted trading platform to allow funds to be deposited through a PayPal account.

But just supporting the integration of trading platforms does not meet PayPal's requirements. Now, it has decided to "end" itself and directly support users for cryptocurrency transactions.

Cryptocurrency transactions on PayPal

On October 21, PayPal officially announced Users can buy and sell cryptocurrencies such as Bitcoin and Ethereum through its online wallet. This also means that for the first time, the payment giant with 250 million daily active users provides cryptocurrency purchase services directly to users. In the next few weeks, PayPal customers in the United States will be the first to experience the function of buying and selling cryptocurrencies, and there will be no service fees for buying or selling cryptocurrencies before December 31, 2020.

As soon as the news came out, the encryption market rose in response, and Bitcoin broke through $13,000 for a short time, reaching a new high for the year.

This news immediately detonated the encryption circle and the traditional financial market. People at home and abroad have forwarded this news, and most users said that it will bring millions of new users to the encryption market. It is undoubtedly a good news.

Ethereum co-founder Vitalik Buterin welcomed the arrival of PayPal.

Mike Novogratz, CEO of Galaxy Digital, a well-known encryption investment institution, also tweeted that the PayPal news is the biggest news in the encryption market this year, and all banks will scramble to support encryption currency.

Similar to Mike Novogratz is Social Capital CEO Chamath Palihapitiya, who said, “After PayPal announced that users can directly purchase cryptocurrencies online, major banks are Meeting to discuss how to support bitcoin business, (whether to accept bitcoin payment or not) is no longer an option.”

Because according to the official instructions of PayPal, the user encrypts After the currency transaction, it cannot be transferred. It is impossible to transfer money to any user in the PayPal system, which means that if users want to transfer assets, they can only convert encrypted assets into legal currency. In addition, users cannot hold the private key themselves.

Therefore, many encryption people have expressed their concerns about PayPal's entry into the encryption market.

Ripple CEO Brad Garlinghouse said: "2 steps forward, 1 step back... It's great to see payments pioneers coming in, but disappointing with some of the fundamentals. The principle/goodness of cryptocurrencies is taken away. I suspect PayPal fears (wait for it...) regulatory uncertainty, which affects its rollout on multiple levels.”

Jesse Powell, CEO of Kraken, another compliance trading platform, believes, "PayPal's support for Bitcoin will bring amazing adoption rates. But don't expect PayPal to change their account freezing policy. They are still centralized, The government will also continue to expropriate the financial system for extrajudicial sanctions.”

Thoughts on PayPal’s Encryption Road

As a traditional payment giant, PayPal is not leading in online cryptocurrency transactions. Competing products Visa and MasterCard have already deployed in the field of digital currency payments. Visa has integrated with many blockchain projects and launched financial services industry Cryptocurrency usage plan.

In the field of encrypted payments, Square, a payment company founded by Twitter CEO Jack Dorsey, is well known to the public. The company’s revenue in the first quarter of 2020 was worth $306 million Currency, a year-on-year increase of 367%. It is undoubtedly one of PayPal's number one rivals in the encrypted payment field.

In addition, there are views that PayPal's move to support the purchase of cryptocurrencies may cause tax troubles. According to the US Internal Revenue Service (IRS), encrypted assets such as Bitcoin will not be considered "currency" but will be considered "assets", which means that every time a user sells, exchanges or disposes of a cryptocurrency Any time money is used to buy something else becomes a taxable event.

For such concerns, PayPal explained that capital gains or losses caused by cryptocurrencies need to be filled in the relevant tax information reports, but users are responsible for their own Tax Matters: "It is your responsibility to determine what taxes, if any, are levied on transactions made using Cryptocurrencies Hub. You can access your transaction history and account statement through your PayPal account to determine any tax filings or payments required

Regarding the above concerns, Harry Zhou, chief compliance officer of Koi OTC, said that PayPal’s support for digital currency trading is actually not a kind of leadership. Instead, it lags behind in years. The product form implemented by PayPal (strong KYC, retail fiat currency transactions under a strong license), Square's Cash App, and Robinhood have been widely implemented a few years ago. In this context, if "tax trouble" refers to "computing tax liability trouble", then there is some worry. Currently such products are designed to automate the calculation and recording of U.S. tax returns.

Will PayPal support DCEP?

So, as PayPal, which has always supported currency digitization, will it accept China's central bank digital currency DCEP payment in the future?

In 2005, PayPal entered the Chinese payment market, using RMB as the only currency, and DCEP has the same effect as RMB. So normally, PayPal, as a payment processor, has every reason to support DCEP.

In addition, in an interview with Reuters, PayPal President and CEO Dan Schulman (Dan Schulman) said that PayPal hoped that the service would encourage the creation of virtual tokens. Used globally and ready payment network for new digital currencies developed by central banks and corporations. He further revealed that PayPal is working with central banks to consider various forms of digital currency and how PayPal can play a role.

So if PayPal accepts DCEP, will it face pressure from the US policy? After all, as a payment company with 250 million active users and a global business, its support will play a huge role in promoting the currency's widespread adoption.

Koi OTC Chief Compliance Officer Harry Zhou’s understanding of this is: the original intention of DCEP is to promote the internationalization of the RMB, so PayPal’s support for DCEP will theoretically have no Opposition from China. From the perspective of U.S. law, U.S. law never prohibits private individuals or companies from using non-domestic currencies, so there should be no U.S. legal obstacles for PayPal to support DCEP. Finally, PayPal is one of the most successful “license philately” companies in the world. Relying on existing licenses to support DCEP will not have legal or regulatory issues, and it will be more of a commercially profitable consideration.

In any case, PayPal has finally taken the first step, and this move has also brought a boost to the encryption market. Cryptocurrencies are being accepted by traditional markets. More companies have moved from watching to acting.

From a regulatory point of view, the US SEC is gradually drawing a policy acceptable bottom line for companies trying to test the encryption market. In the future, there may be more traditional giants trying to enter the encryption market. This is undoubtedly a challenge for companies in the industry, but there are more opportunities.

Reference:

http://money.cnn.com/2014/09/26/technology/paypal-bitcoin/index .html

https://blog.coinbase.com/coinbase-adds-support-for-paypal-and-credit-cards-21968661d508

https://www.theblockbeats .com/news/20318

https://www.reuters.com/article/paypal-cryptocurrency/paypal-to-allow-cryptocurrency-buying-selling-and-shopping-on-its-network -idUSL1N2HB14U?rpc=401&