- PayPal has significantly increased its ‘safeguarding’ of crypto since the end of last year.
- The company mainly holds Bitcoin and ETH.
- PayPal admits it does not store the private keys of its crypto users.
Bulk BTC and ETH
In the Q1 filing, PayPal showed a 56% increase in its crypto holdings from Q4 last year. Bitcoin was the major coin, with $499 million held, while the company also declared $362 million in ETH. PayPal allows its users to transact with these two significant cryptos, as well as Bitcoin Cash and Litecoin.
At the end of last year, PayPal only disclosed $604 million in crypto, acquiring significantly more as 2023 rolled in. Additionally, the total financial liabilities reported for Q1 were $1.2 billion, with crypto making up 77%. Another increase from last quarter – of about 10%. PayPal’s popularity as a crypto provider has gone from strength to strength since it entered the market a few years back.
Fueling Crypto Adoption
Quite unexpectedly, in October 2020, PayPal entered the crypto service game by allowing its customers to buy, sell, and hold digital currencies through their accounts. Since then, the FinTech giant has experimented more and more in the space, including with stablecoins – although this has fallen away.
The increase in crypto holding from PayPal is likely a result of favorable market conditions seen through the first three months of the year. The firm notes that it “allow[s] customers in certain markets to buy, hold, sell, receive, and send certain cryptocurrencies” but that the firm also “recognizes a crypto asset safeguarding liability.”
Not My Keys
PayPal also outlines in the report that custody services of the crypto they have disclosed fall to a single licensed third party that holds the customers’ private keys. The risk of this is inherent and noted by PayPal. The company states:
“We utilize one third-party custodian; as such, there is concentration risk in the event the custodian is not able to perform in accordance with our agreement.”
However, the firm also highlights that they have not incurred any safeguarding loss events at the time of the report.
On the Flipside
- PayPal halted its stablecoin development following an investigation by New York regulators into Paxos and its work with another stablecoin, BUSD.
Why You Should Care
As traditional and popular FinTech companies like PayPal make crypto more accessible to people, the adoption of these assets should grow. However, the decision to put a billion dollars worth of assets under the custody of one company could be disastrous should anything negative befall the holding firm.
Read more about how PayPal entered the crypto game:
Read more about Bittrex’s filing for bankruptcy: