PayPal’s Crypto Strategy Includes Venmo and CBDC Support
PayPal held its Q3 2020 earnings call on November 2, and it offered some insight into its plan for cryptocurrencies in 2021. The company’s Q3 performance itself was exceptional, with the stock value partly bolstered by news of cryptocurrency support.
Details Emerge of PayPal’s Crypto Support
It appears that 2021 will be a strong year for PayPal. Or, with the advent of Central Bank Digital Currencies (CBDC), at the very least one that entails a monumental shift. The company laid out its strategic initiatives for 2021, which align nicely with other developments in the fintech space.
Putting aside the news of its cryptocurrency initiatives for a moment, PayPal’s Q3 2020 performance was one of its best to date. The company logged a Total Payment Volume (TPV) of $247 billion, up 38% from last year. It also saw 15.2 million new accounts created, likely up from the growth of remote working. Revenue is also up 25% year-over-year, at $5.46 billion.
PayPal’s performance improved on nearly all metrics, with ‘new account creation’ especially indicative of growth. President and CEO Dan Schulman noted the quantitative improvements that occurred during the pandemic.
He elaborated that they would be “a digital wallet that embraces all forms of digital currencies and payments”. He even stated that PayPal could be the market leader in the digital currency space.
The long story short is that PayPal is encouraged by the reception of the support for cryptocurrencies. This enthusiasm includes a waitlist for crypto access that was 3–4 times higher than expected. The unanticipated interest could have sparked the interest to double down on its strategies.
Consequently, they are doubling down on their strategic initiatives, which includes Venmo support. The interest is so strong that PayPal has increased its buying limit from $10,000 to $15,000.
The firm will bring crypto access to its Venmo app and international countries in the first half of 2021. This is a significant move for the crypto market, as PayPal has nearly 350 million users. Furthermore, Venmo itself processed approximately $44 billion in Q3, growing by 61%.
CEO Schulman expressed a clear sentiment that he wants PayPal to be the market leader in crypto. Can that really happen?
PayPal to Support CBDCs
The question is whether the exposure of cryptocurrencies to its 28 million merchants will have a deep and lasting impact. The cryptocurrency market has a tendency to overblow headlines. It will likely be at least a year before we see tangible results.
Then there are the legal issues. The company has insisted that it will follow regulation and work with authorities to ensure compliance. It is also intent on partnering with banks to support Central Bank Digital Currencies (CBDCs), which are undergoing rapid development.
This could lead to increased competition to the crypto market’s centralized exchange stalwarts like Coinbase and Binance. Today, even the top apps for stock trading now typically offer access to popular cryptocurrencies. The devil will be in the details, however, as many long time users will be wary of processing fees, security, oversight, and centralization in general.
For the rest of the market, largely new users and merchants, there is certainly hope for PayPal to draw them in. PayPal offers familiarity, trust, and security, which isn’t exactly commonplace in the world of buying, selling, or storing cryptocurrencies.
PayPal’s Impact on the Future of Digital Assets
It might seem counterintuitive that PayPal’s stock value has fallen roughly 12% since the cryptocurrency announcement on 21. While PayPal’s stock initially jumped to an all-time high, it didn’t last too long. Still however, on the whole, the stock is experiencing its best period—with positive sentiment.
Bitcoin, on the other hand, is hovering in the $13,500 range—it too, on the whole, it is experiencing positive sentiment. eToro’s Q3 2020 report, for example, certainly presents good omens for the top market asset.
Again, the impact of PayPal on Bitcoin’s price is too early to tell. There are several steps between now and then, but it bodes well. The fact that we are even having this discussion is a very optimistic sign.
Bitcoin’s price is tied to more than just the PayPal announcement. Should things pan out well for Bitcoin, we can expect more companies like PayPal to support Bitcoin. This can snowball into a bullish period, which investors are undoubtedly hoping for.
PayPal’s arrival on the cryptocurrency scene is perhaps a sign of the market’s maturity. Long time investors will not see it as a surprise, having called out such involvement for quite some time.
The cryptocurrency market is entering a new era—of that we can be certain. The combination of incumbent firms, platforms, and CBDCs, suggests increased growth into the future. Exactly what that timeline looks like, no one can be sure.
Do you expect PayPal to usher in a new age of adoption? Will CBDCs benefit from it? Let us know in the comments below.
Disclosure: Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.