Bitcoin prices rise on PayPal crypto news. US reticent on CBDC.

In this issue

1. Bitcoin prices rise on PayPal’s cryptocurrency news
2. US Fed not yet sold on digital dollar
3. USDC stablecoin adds Solana blockchain to rely even less on Ethereum
4. In China: new DCEP digital currency law; digital yuan to be used by 80,000 rural banks
5. Funding spotlight: Bangalore-based Signzy raises US$5.4 million

From the Editor’s Desk

Dear Reader,

286 million customers. 

The digital assets / cryptocurrency space just got a little more crowded. That’s how many active users PayPal currently serves… and now in the cryptocurrency space. With billions of transactions per year, PayPal now also wants to add cryptocurrency into the mix, allowing users to buy and sell via its new digital wallet. As one of the biggest and best-known online payments brands in the world, PayPal has now created an on-ramp to cryptocurrencies for mainstream customers. And if you have any doubt as to what this means in terms of liquidity, you need not look further at bitcoin prices on the heels of the announcement. Bitcoin prices climbed 5% as PayPal announced it is launching its own cryptocurrency service last week. 

It’s a natural progression if you think about it. As cryptocurrencies and alternative digital assets become more mainstream, so too are mainstream firms engaging and exploring how they want to participate. Question is, are everyday retail customers ready to explore the sometimes murky world of cryptocurrency trading, price volatility and yield farming in DeFi? Baby steps first.

This week’s Current Forkast notes that necessity is the mother of invention. We are seeing this play out in real time as global markets react to Covid-19 slowdowns, political instability and trade tensions. As the appetite for alternative assets grows, the desire to diversify and hedge intensifies. Trusted brands, from businesses to sovereign nations, are all getting in on the act.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bitcoin prices rise on PayPal’s cryptocurrency news 

By the numbers: PayPal — over 5,000% increase in Google search volume.

Global online payments system PayPal unveiled a new service to buy, hold and sell Bitcoin, Ethereum, Bitcoin Cash and Litecoin directly within users’ PayPal digital wallet. The service will be made available to U.S. users in the coming weeks and will expand to international markets in the first half of next year. 

• Following the announcement, bitcoin’s prices topped US$13,000 for the first time since July 2019 and is currently trading at $13,763 at the time of publication, according to CoinMarketCap data. PayPal also hit its all-time high on Nasdaq (PYPL).
• PayPal may not be finished here. On Friday, Bloomberg cited “people familiar with the matter” to report that PayPal may be looking into acquiring multisignature bitcoin custodian BitGo.

Forkast.Insights | What does it mean?

PayPal supporting cryptocurrency should be groundbreaking news. On any over-the-counter exchange, like LocalBitcoins and Paxful, people have been buying and selling crypto for years — albeit against the payment processor’s terms and conditions. According to publicly available data, LocalBitcoins has between US$2 million and $7 million a day in volume and there are currently 215 traders that use PayPal. Its bigger brother, Paxful, does just over $1.6 billion in volume a year and has dozens of traders offering the same.

In short: this is a major market that operates in the gray area, as PayPal is known to lock and throw away the key accounts suspected of trafficking in cryptocurrency. So surely this is something the company would want to bring in from the cold with this announcement? No, not really. The company is quick to highlight that while you can buy and cash out cryptocurrency, you can’t transfer crypto outside of PayPal.

It’s safe to assume that PayPal is right now battling the leviathan of global financial regulations to prepare for its next move. While PayPal is an authorized money transmitter in dozens of countries around the world, regulators have a spectrum of opinion on cryptocurrency. Mass adoption of the Financial Action Task Force’s “Travel Rule” would be a necessary first step. The question of custody is also one regulators are considering but don’t have a universal answer for. In PayPal’s case, you don’t control the keys, thus PayPal retains custody of the coins.

So what’s the point of all of this? Exposure to an alternative asset class, but also preparing to create on-ramps to future digital assets like a galaxy of stablecoins or even CBDCs that are blockchain-based, like France’s effort. 

This isn’t as exciting of an announcement as many had…