PayPal’s Move of Accepting and Managing Bitcoin is a Wake-Up Call for Banks
- October 22, 2020
- 4 minutes read
Over the past months, we’ve seen several signs that digital assets are becoming widely accepted in the mainstream throughout the U.S. economy: It started with the OCC announcement back in July, authorizing banks to offer crypto custody service, and continued with local governments across the world exploring pilot programs for launching their own, government-issued digital currencies. These regulatory changes keep feeding the market appetite for digital assets, with 40 Million Americans already owning Bitcoin and its value soaring after the Oct. 20th announcement, reaching its highest price since Jan. 2018.
PayPal’s announcement, however, is a real game changer. This is not some unbinding statement by a government agency – but an official announcement by the world’s largest networks of merchants, with 26 million shops and 340 million active users. PayPal is not stopping at just connecting between coin owners and sellers: it’s actually going to handle the FIAT-Crypto currency change through its wallet, Venmo – as well as start buying and selling crypto directly. In other words, shop owners will keep receiving Dollars, Pounds or Rupees in exchange for goods, without having to change a thing in their payment system. More importantly, PayPal will offer users to buy and manage their own crypto – competing with crypto exchanges around the world.
This move sends out a clear signal to the market: it removes any remaining doubt regarding the sustainability of digital assets, as well as their usability. It’s not just legitimizing and institutionalizing crypto – it transforms digital assets from an investment channel into real money you can use right here, right now. What this means for the average Bitcoin owner, is that you can still hold on to it and see if it adds value, but at the same time you can start buying stuff with it. Which stuff exactly? Anything sold by shops that accept PayPal – which is pretty much anything you can think of, from books to burgers, movie tickets to a massage.
Banks can no longer afford to sit on the fence with Crypto: As digital assets become massively used, banks that jump on the blockchain bandwagon will get a significant first mover-advantage, offering current and new customers to open and secure manage a crypto account; other banks that keep hesitating and sticking only to traditional FIAT currencies will eventually lose market share.
PayPal’s announcement may very well be the tipping point in the market acceptance of crypto. Realizing that consumers will start casually using crypto to buy and sell stuff, banks have a unique opportunity to lure them to deposit digital assets, where bank customers can manage these assets, keep them safe, withdraw them, or transfer them– just as they do with their Dollar account.
The key for doing this is deploying a robust infrastructure for crypto payments and securing these assets from hackers. And that’s exactly where GK8 comes in: we’ve developed an out-of-the-box platform for custody and management of digital assets – created specifically for banks. Realizing that banks wouldn’t be inclined to develop their own IT infrastructure and payment rails for a new type of asset class, our offering is based on an end-to-end platform, including an 100% air-gapped cold vault, an advanced MPC wallet for automatic transactions, and mobile endpoints.
And while the cyber security methods used to protect the bank’s digital assets are highly sophisticated, from your customer’s point of view – withdrawing crypto is as swift and simple as transferring funds from their regular checking account: it’s done in seconds, via the bank’s app, in a simple yet secure way. This is where the real opportunity for banks lies: PayPal won’t let users to take out their Crypto without converting it to FIAT currency first. Banks, on the other hand, can offer customer to open and manage their crypto account and withdraw their digital assets anytime. With the notion that crypto is going mainstream, and the right technology to safeguard digital assets, banks can seize the market with a new business line in a rapidly growing market.