PayPal CEO Reveals Big Plans for Crypto to Become a ‘Market Leader in the Digital Currency Space’

In its Q3 2020 earnings call on Monday, PayPal Holdings, Inc. (NASDAQ: PYPL) discussed increasing the utility of cryptocurrencies and to embrace new forms of central bank digital currencies (CBDC), which are just “a matter of when and how they’re done, not if.”

Dan Shulman, the President and chief executive officer of PayPal, shared that over the next year, both PayPal and Venmo will be undergoing a “fundamental transformation” that expands to crypto as well.

“We are entering a new era of financial services where our wallets and all the services around them are moving from physical to digital.”

This is why last month, the online payments company announced that they would allow its account holders to buy, sell, and hold cryptos; a decision made after a “lot of research.”

“Very Eager” Users

The service is opened in the US, for now, which will be then expanded to international markets and then Venmo platform in the first half of next year, that too in “in close partnership with regulators.”

The early reactions to this announcement has been “well beyond our expectations,” said Shulman.

“Our base is very eager for us to offer these capabilities,” which is rolled out to only 10% of the user base with a waiting list two to three times the expectations. It will be rolled out to 100% of the user base in the US in the next two to three weeks, with the limit increased from $10,000 per day to $15,000 per day based on this demand.

“We’re beginning to already see some halo effects that go on with that,” said Shulman.

“My conversations with central banks, with the regulators, with a number of folks in the crypto field, there is no question that digital currencies are going to be rising in importance, having increasing functionality and increasing prominence.”

So Much More

Shulman is “really excited” about “dramatically increase the utility of cryptocurrencies” by enabling a crypto holder to instantaneously transfer that crypto in PayPal account into fiat currency with no incremental fees charges.

Through its platform with digital wallets and its scale, Shulman believes PayPal can help shape the utility of digital currencies that ranges from interoperability between wallets, between currencies, and “importantly into our network of merchants for commerce” — a way of using crypto as a lower-cost funding mechanism.

At the beginning of the next year, consumers will also be allowed to shop across all 28 million merchants, a solution that will not involve additional integrations, volatility risk, or incremental transaction fees for consumers or merchants that will “fundamentally bolster the utility of cryptocurrencies.”

“This is just the beginning of the opportunities we see as we work hand in hand with regulators to accept new forms of digital currencies,” to be “a market leader in the digital currency space,” Shulman said.

As the company looks ahead to Q4 and 2021, they also see “multiple tailwinds from the permanent shift towards a digital economy.”

Also Read: PayPal Exploring Acquiring Crypto Companies, Already in Talks with Bitcoin Custodian BitGo

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Author: AnTy

CFTC Tech Advisory Meeting Features Possible Fed-backed CBDC Scenarios

The CFTC Technical Advisory Committee (TAC) discussed a Fed-backed digital currency in the latest remote meeting which it held last week. This comes as more jurisdictions move to consider CBDC’s following China’s progress in this space and the COVID-19 pandemic that has since raised the need for digital money.

One of the keynote speakers, Georgetown Law Professor, Chris Brummer, presented some scenarios under which the U.S Fed could issue a CBDC, comparing the solution to that being advocated by stablecoins. Brummer was keen to highlight that not all CBDC’s are created equal hence multiple scenarios for a dollar-backed CBDC.

Dollar-backed CBDC Design Suggestions

In his presentation, Brummer further detailed six CBDC approaches that the Fed could take in developing a digital dollar. Most notably was the decision of whether to create an account or token backed ecosystem. The former is pretty similar to today’s bank accounts, only that into. A token ecosystem, on the other hand, will be less strict since no identification would be required to operate in the network.

Another suggestion was whether to have the CBDC on both retail and wholesale markets or only on the latter. Wholesale markets encompass commercial banks and other large financial institutions, while a retail market refers to the general public.

Brummer noted that this was another angle the Fed should consider before transforming the CBDC niche idea into a reality. He further summarized that the future of CBDC’s could only be dictated by the issuing authority since some central banks could decide to use commercial banks or issue the currency directly.

Greater Value Than Stablecoins

Recent months have seen stablecoins like the USDT gain popularity as stakeholders in the crypto market seek to preserve value while doing other activities such as yield farming. Brummer now says that CBDC’s set out to achieve a similar goal and could have the upper hand since trusted monetary authorities back them. Brummer said,

“Central bank currencies can be seen as trying to provide more certainty and safety, if one will, behind the utility that a traditional stablecoin aspires to achieve.”

While the underlying value compared to stablecoins is clear, Brummer, however, warned that adopting CBDC’s could destabilize the whole financial ecosystem as well. This is because central authorities might overlap the role of financial institutions in onboarding and serving clients, should they choose to roll out something like an account-based CBDC run by the Fed.

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Author: Edwin Munyui

CBDC’s Provide Greater Monetary Control But Face Risk of Becoming too Dominant: BoE Deputy Gov

The Bank of England’s Deputy Governor of Financial Stability discussed Central Bank Digital Currencies (CBDC), stablecoins and cryptocurrencies. Delivering the speech was Sir Jon Cunliffe at the London School of Economics.

According to a report by Crowdfund Insider, the topic discussed was: ‘It’s Time to Talk About Money,’ with the Deputy Governor beginning by announcing that a “new wave of technological development” which uses distributed ledger technologies is underway.

The Bank of England will need to consider how to move forward in their management of innovations like stablecoins, said the Deputy Governor.

Too Much of the Traditional: Current Regulations Favour the Old

While questions raised included just how the bank should address fiat-backed cryptos, how to regulate them, and the boundaries of the public-private sector, what remains important is that they’re not exclusively UK-based problems. Cunliffe said there is “considerable opportunity to improve the domestic retail payment systems.”

“Innovation and competition can lead to better, cheaper, payments services in the economy. But, the payment systems on which we depend have to be reliable and robust, prudentially and operationally. Regulation, therefore needs to keep pace with the changes in the payments landscape and the proliferation of new actors. The same risks have to be subject to the same regulation.”

The UK regulatory body focuses on the “banks and core payment systems that have traditionally performed the most functions.”

But innovation and competition introduce more actors to this chain of action and “the current regulatory framework does not capture the full ‘end to end’ risks.“

Stablecoins for underbanked but pose considerable risks

Stablecoins, according to him, may help in the reducing friction and expenses within current payment methods, while also providing improved services for the underbanked. Cunliffe said that

“These proposals have, to be fair, shone a light on some of the failures and costs of the current domestic systems … which is particularly true for cross border payments.”

Retail cross-border payment systems are still relatively undependable, slow, and overly expensive. This leaves many potential customers with no way to use them.

Cunliffe highlighted Facebook’s Libra proposal as one such high profile solution which claims such benefits. At the same time, however, because of the enormity of Facebook’s reach, it may become extremely important.

“We are considering these risks internationally within the Financial Stability Board, which will report this year on developing regulatory recommendations with respect to stablecoins.”

Stablecoins also raise broader regulatory questions such as data protection, competition, anti-money laundering, and the funding of potential counter-terrorist groups, the official stated,

“Stablecoin proposals raise broader regulatory issues, e.g. for competition, data protection, anti-money laundering and counter terrorist financing.”

CBDC – “Risk-free form of money”?

CBDCs, meanwhile, could provide a “risk-free form of money,” according to the Cunliffe. Offering greater financial authority from the Bank and further assisting that the payments system remains competitive for individuals and businesses. While this is positive, the risks are also profound.

“For all the opportunities, there are also some significant potential implications (…) such as the implications for the supply of credit to the economy if the role of banks changes, liquidity dynamics both in normal times and in stress, and the risk that a CBDC is too successful and becomes dominant and a single point of failure in itself.”

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Author: AnTy

Bank of Russia Announces Possible Central Bank Digital Currency Launch, But Not Anytime Soon

  • The head of the central bank of Russia discussed a future launch of a central bank digital currency.
  • One of the main disadvantages cited in reports is the lack of anonymity involved with digital assets.

Cryptocurrency is expanding to regions around the world, though every country has different ways of handling it. Some countries have created regulations that are more suitable to development in their economies, but central bank digital currencies (CBDCs) are slowly gaining momentum. These assets are typically a type of digital currency that is issued by the bank, but with all of the properties of centralized fiat currency. New reports from TASS indicate that Russia’s central bank is considering this type of asset, but the actual launch will not be for a while.

Elvira Nabiullina, the head of the Bank of Russia, spoke at a student conference in Skolkovo, stating that realizing a CBDC is not a possibility at the moment, but there are many central banks inside and outside of Russia that are looking into this possibility. Reports indicate that she also spoke about the need to secure how strong the technology is before it can be used for any possible CBDC realistically.

“If we are talking about a national currency that works as a whole in the country — that is, not about private assets — of course, this requires the technology to provide reliability and continuity. Technologies must be mature, including distributed ledger technologies,” said Nabiullina.

The bank head also spoke about the connection between the rise of CBDCs at the same time that debates are going on regarding the implementation of cash-free options for banks. She added that there are some jurisdictions that are already making the efforts to go cashless, though the demand for actual cash is higher in some regions. In the latter regions, the locals prefer to have a certain level of anonymity.

As more customers end up getting involved with digital currencies independently, Nabiullina stated that these volumes are a sign of “some sense of society’s readiness.” As Nabiullina sees it, researchers focused on CBDC should consider the advantages of issuing such assets, weighing them against how other technologies could benefit customers, like fast payment systems.

The Bank of Russia recently released a brief on the policies surrounding CBDCs, which indicate that there could be a way of issuing a less risky and more liquid asset instead, reducing the cost of performing these types of transactions in the economy. Still, the brief zeroed in on a major disadvantage to call – a lack of anonymity.

Last month, Nabiullina indicated that the central bank of Russia was interested in created a cryptocurrency that is pegged to gold, helping with mutual settlements around the world with other jurisdictions. Also, in the same month, government-backed RT stated that there are ongoing discussions between Venezuela and Russia that are discussing the possibility of using the Russian ruble and the Venezuelan Petro crypto asset as a way to close mutual trade settlements.

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Author: Krystle M