Crypto Pal

Today's buzz is PayPal's entry into crypto. Some random notes:

Strategy
  • Logical move for PayPal because exchanges like Binance might potentially step into its turf. For now, Paypal crypto does not compete with Binance because Paypal is a custodian not an exchange.
  • Strategically, PayPal channels people who might be interested in dabbling in crypto to PayPal, capturing noob users before they try exchanges.
  • Libra, which PayPal initially supported, seems to be in limbo, though recently the Libra Association hired a slate of CxOs. Something might be happening there too, soon.
  • PayPal looks to be shaping up and getting ready for cryptoverse including CBDCs and Libra if and when they come on tap.

Operations
  • Paypal is a crypto custodian (like s safe deposit box) not an exchange (like bazaar or market).
  • It allows one to buy crypto and hold it with PayPal and sell crypto back to PayPal, or use it to pay for stuff. For payments, the usual PayPal transaction fee of around 3% applies.
  • Unlike an exchange, PayPal does not allow one to trade crypto (eg exchange BTC for ETH) or send and receive crypto (eg send one ETH to a friend)
  • Crypto transactions are capped at $10K per week and $50K per year. These limits suggest the facility is not for speculation or stashing away lots of money. Instead it can be used as a minor portfolio and for payments.
  • All buy and sell are in USD so unless PayPal natively supports other currencies there might also be a USD exchange rate fee. No details available about an international rollout, the service is presently US focused and licensed.
  • Do high crypto transaction fees and long confirmation times apply when buying stuff using crypto on PayPal? Probably not, PayPal could possibly aggregate transactions and commit them en bloc (ie as one transaction) to the blockchain periodically.
  • Back-office, Paxos is handling cyrpto for PayPal. Paxos also signed up digital bank Revolut for its crypto custodian services.