The announcement at the end of October that PayPal was going to enter the crypto ecosystem sparked a concert of reaction and applause from the cryptocommunity. In the wake of its first announcement, PayPal announced plans to acquire cryptos companies to expand its services, but also to open its services to CBDCs – future digital currencies issued by central banks. Announcements of this kind followed one after the other, causing the price of Bitcoin to soar… PayPal: the future giant of cryptos?
If at first glance this announcement is indeed excellent news that pushes the debate around cryptos in the right direction, it is nevertheless necessary to take a step back on these announcements.
US account holders will be able to buy, sell, and keep cryptos in their PayPal wallet. Other regions, including Europe, are expected to follow in the first half of 2021. The main function of the service is to allow customers to invest in cryptos, use them as a store of value, then convert them into fiat in the PayPal system, and only then use them as a means of payment. Customers should be aware that PayPal thus imposes a real monopoly on the conditions of acquisition and use of bitcoins.
To begin with, PayPal will not allow the use of cryptos already held by the customer – it is impossible to transfer assets to the customer’s account or to remove cryptos from the account and transfer them to other cryptographic portfolios. It is also not possible to interact with third party portfolios. Summum of this centralization, the customer is not free to access his crypto account directly (no private keys)!
The system operates in a virtual vacuum. The logical continuation of these first characteristics: to make purchases in crypto, the customer will first have to acquire cryptos through PayPal, at its pricing conditions. This can lead to losses due to the exchange rate. Also, during payment in crypto, immediately before the payment, the cryptos will be converted into fiat at a fixed rate of PayPal. This can again lead to losses due to the exchange rate. Moreover, the commission that PayPal charges to merchants for the use of its cryptos services is 1.9%, which is not cheap either.
We are therefore far from the democratization of cryptos payments or cryptos more widely, but more about the monopolization of this technology, by a private operator who centralizes for commercial purposes – everything that is far from the philosophy on which cryptocurrency is built.