PayPal CEO's crypto quote: Cryptocurrencies will redefine the financial world

Produced by | Shirasawa Research Institute

PayPal has been an advocate for the crypto industry in recent years. The payments giant, which itself has more than 350 million active users, has allowed users in the US and UK to trade or hold Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC), while supporting users to make payments using these cryptocurrencies.

Earlier this year, PayPal showed the world its next project, the dollar-pegged stablecoin (PayPal Coin), and although there is no more information on the project yet, Jose Fernandez da Ponte, senior vice president of crypto and digital currencies at PayPal, revealed in an interview that it was an exploratory attempt that, if approved, would meet all the necessary regulatory criteria.

Of course, PayPal support for cryptocurrencies is inseparable from the advocacy of executives.

Axis Tel Aviv is an annual israel-based investment and innovation conference that brings together international investors and leading Israeli startups. This year's meeting will take place on March 29 at the Perez Center for Peace and Innovation. Before attending the meeting, Dan Schulman, CEO of PayPal, was interviewed by Israeli media outlet C-Tech, reiterating his positive stance on the crypto industry. In his view, the "crossover" between digital assets, CBDCs, stablecoins and digital wallets will "redefine many of the financial worlds of the future."

Dan Schulman, from C-Tech

One of the most discussed topics in the crypto community is the price of various cryptocurrencies and the predictions for them. Schulman, however, doesn't think it matters. For him, what is important is the strengths of the crypto industry and its ability to make a positive impact on the financial world:

"I'm very excited about what crypto and blockchain technology can do for the financial system of the future. I think everyone's initial thoughts about cryptocurrency, buying and selling it, and what the price of Bitcoin will be tomorrow is the part that I'm least interested in – thinking of cryptocurrency as an asset class. To me, what's really exciting about digital currencies is what utility they can provide in payments. ”

Immediately after, Schulman emphasized his position that the combination of digital assets, central bank digital currencies (CBDCs), stablecoins, and digital wallets could reshape the financial industry:

"Obviously, across the globe, central banks are considering issuing digital currencies. The intersection between CBDCs, stablecoins, digital wallets, and enhancing the utility of payments through cryptocurrencies is not only fascinating, but I think it will redefine many of the financial worlds of the future. ”

It is worth mentioning that Schulman's "focus" on the crypto industry dates back to 2015, and although cryptocurrencies have been under the attention of PayPal for 4 years, he believed that cryptocurrencies were just an asset. It wasn't until 4 years later, in 2019, that Schulman's "obsession" slowly surfaced, not just as he personally held bitcoins and formed a blockchain/crypto research team for PayPal, but as CEO of a payment company, he predicted the potential of cryptocurrencies as payment alternatives.

"Over the next 5 to 10 years, you're going to see more changes in the financial system than you've seen in the last 10 to 20 years. How do we view the modernization of existing financial infrastructure? It needs to be modernized because it is now inefficient. If you cash your check, it may take you three days to get your money. If you're sending money internationally, it may take up to 7 days to receive your money.

But the current price of cryptocurrencies is still volatile, so the demand for merchants is not high under the premise that the profit is very low. All they have to do is convert it into fiat immediately, but the process of conversion requires a fee, so any cost advantage is usually swallowed up by the fee. Until it becomes less volatile, it won't be a currency that is widely accepted by merchants on the web. That doesn't mean I don't think cryptocurrency is an interesting thing, and that people are trading it in large numbers. It is now more like a commodity than cash. But you can consider use cases in different countries and different places, where it can be more stable than alternatives. ”

Also in 2019, when Facebook's ambitious crypto project Libra (later renamed Diem) was launched in June, a total of 28 companies became members of the Libra Association. Companies including PayPal, Visa, MasterCard, and Coinbase will help build and operate services around the project. Although one of the first members to join Libra, PayPal was also the first to quit.

Afterwards, Schulman gave the reason for the exit in an interview and further praised the "financial inclusion" of the blockchain infrastructure.

"When David Marcus [Facebook's head of Libra] first came to talk to us about Libra, he built it in a way that was financially inclusive to us. We're always exploring next-generation technologies – such as blockchain infrastructure – to improve efficiency. As we learn more about [Libra] and see that there's so much more to do in our own future plans, we're able to move forward with financial inclusion faster than we can devote all of those resources to Libra." ”

Since then, schulman's PayPal has begun to move into the crypto industry.

In October 2020, driven by the global covid-19 pandemic and strong investor interest in digital currencies, PayPal announced the launch of a new service that has boiled the crypto industry by enabling users to trade and hold cryptocurrencies directly from their PayPal accounts, including four popular cryptocurrencies, Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC). And plans to improve the efficiency of its platform's 26 million merchants by using cryptocurrencies as one of the payment channels.

As part of the new service, PayPal will provide educational content for cryptocurrency holders to help them understand the crypto ecosystem, the risks and opportunities associated with investing in cryptocurrencies, and information about blockchain technology. Prior to this, PayPal had obtained a cryptographic license from the New York State Department of Financial Services (NYDFS) Bitlicense.

Commenting on the service, Schulman said: "The shift to digital currencies is inevitable, it brings clear advantages in terms of financial inclusion and access, the efficiency, speed and resiliency of payment systems, and the ability of governments to quickly disburse funds to citizens, and our global reach, digital payments expertise, bilateral networks, and strict security and compliance controls provide us with the opportunity and responsibility to help promote understanding, exchange and interoperability of these new transaction tools." We are eager to work with central banks and regulators around the world, provide our support, and make a meaningful contribution to shaping the role that digital currencies will play in global finance and commerce in the future." ”

While some other mainstream fintech companies at the time, such as payment providers Square and Revolut, had integrated crypto transactions, the broader coverage of PayPal attracted more attention.

Mike Novogratz, CEO of Galaxy Digital, a New York-based asset management firm focused on digital assets, likened the move to "the gunshots the world hears on Wall Street."

According to reports from PayPal's fourth quarter of 2020, revenue grew significantly in the fourth quarter after consolidating crypto trading; at the same time, PayPal recorded the number of active accounts on its platform, adding up to 16 million new active accounts in the fourth quarter alone; total payments in the fourth quarter increased by 39 percent to $277 billion, well above the company's $267 billion expectations; and net profit grew further, from $84 million a year ago to $1.1 billion.

Schulman attributes this significant growth to cryptocurrencies: "Through our crypto integration efforts, we have achieved very good results strategically. At least half of crypto trading users open their PayPal accounts every day. ”

Last year, PayPal also added the service to its payment app, Venmo, introducing trading and holding BTC, ETH, BCH and LTC to its more than 70 million users, who will be able to buy cryptocurrencies as low as $1 and can use their Venmo balances or associated bank cards to trade their assets. What's more, it allows users to use the cryptocurrency they hold to pay their millions of online merchants worldwide.

In response, Schulman commented: "This is the first time you can use cryptocurrencies as seamlessly as using a credit card or a debit card in a PayPal wallet. ”

A few months later, the service was extended to PayPal UK users.

To maintain compliance, the company is currently researching how to integrate tax reporting for transfers into crypto trading services on its platform.

With the passage of the U.S. Infrastructure Investment and Employment Act, cryptocurrencies will be defined as a security and subject to increased information reporting requirements from "brokers," which will now include "anyone responsible for providing any service on a regular basis to enable the transfer of digital assets on behalf of others." In other words, once the new law goes into effect in December 2023, all digital asset brokers, exchanges, or sellers will be required to provide information reporting forms for digital asset transactions, including cryptocurrencies and NFTs.

The latest development is that TaxBit, a leading tax firm in the crypto industry, has teamed up with PayPal and crypto exchanges including Coinbase, FTX and others to create the TaxBit network, which will provide free, unlimited tax filings for cryptocurrency and NFT investors on exchanges that belong to the TaxBit network in 2021.

PayPal The realization of "financial inclusion" for cryptocurrencies is also reflected in the creation of stablecoins pegged to the US dollar. Jose Fernandez da Ponte, senior vice president of cryptocurrencies and digital currencies at PayPal, confirmed the rumored "PayPal Coin" in January, saying: "The company does not yet have stablecoins dedicated to payments, and for the use of PayPal, stablecoins need to support large-scale payments and have security." It is therefore important to clarify the regulation, the regulatory framework and the licenses required in this area. ”

However, the crypto ecosystem is not only about transactions and payments, but also the popular DeFi and smart contracts in the past two years have also been looked at by CEO Schulman:

"How can we use smart contracts more effectively? How do we digitize assets and make them available to users who don't have access to them? There are also some interesting DeFi apps, so we're working hard. ”

Risk Warning:

According to the "Notice on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote and endorse any business and investment behaviors, and readers are requested to strictly abide by the laws and regulations of the region and not participate in any illegal financial acts.