PayPal Announces First Partnerships in Bitcoin Space

Pete Rizzo (@pete_rizzo_) | Published on September 23, 2014 at 18:19 BST

PayPal has announced partnerships with the three largest payment processors in the bitcoin space – BitPay, Coinbase and GoCoin.
Though the online e-commerce pioneer stopped short of integrating bitcoin into its digital wallet or payment processing services directly, the move marks PayPal’s first formal offering to the bitcoin community.
In a blog post penned by senior director of corporate strategy Scott Ellison, PayPal revealed that online merchants will now be able to accept bitcoin via all three companies through its PayPal Payments Hub, its product that enables customers to accept credit cards, mobile carrier payments and other payment methods through a single integration.
Ellison lauded BitPay, Coinbase and GoCoin for their commitment to ensuring consumer protections on their platforms, while suggesting that the offering will appeal to a number of its key customer groups, writing:

“We believe digital goods merchants will be excited to work with these industry-leading companies to sell ringtones, games and music and get paid with bitcoin.”

Notably, the announcement follows the decision of PayPal subsidiary Braintree to partner with Coinbase earlier this month.
PayPal is available in 193 markets and 26 currencies. With 143 million active registered accounts and $6.6bn in revenue at the end of 2013, the e-commerce giant brings the potential for new users and new business to the bitcoin economy.

Embracing innovation

Ellison went on to suggest that PayPal is committed to embracing innovation, and that this has lead to its early support of bitcoin. Further, he suggested the company will be monitoring its first formal bitcoin trial to assess how it moves forward with the payment method, writing:

“We’re proceeding gradually, supporting bitcoin in some ways today and holding off on other ways until we see how things develop.”

PayPal cited its commitment to allowing businesses freedom of choice and promoting safer buying experiences as key reasons for its decision.
BitPay, Coinbase and GoCoin will pay a referral fee to PayPal for new business they gain through the platform, meaning their existing pricing structures will be unaffected by the move.

Support for select business models

Ellison framed the decision as the latest way PayPal is seeking to support the bitcoin ecosystem, pointing to its past efforts to help companies in the bitcoin mining space accept PayPal for their products.
However, Ellison suggested that PayPal is conscious of the controversies that have dominated this segment of the bitcoin industry, and that its support will continue for merchants that meet certain criteria, writing:

“To safeguard customers, we’ve decided not to work with merchants who pre-sell these products. This is consistent with our approach to pre-sales of other goods; we hold off anytime we determine that pre-selling may not provide a good buyer experience.”

In recent months, a number of bitcoin mining companies, including early and current market leaders such as Butterfly Labs and CoinTerra have faced lawsuits from customers for failing to deliver equipment on advertised timelines.

Addressing security concerns

In his statements, Ellison also suggested that PayPal has been monitoring conversation surrounding how bitcoin will be regulated, clarifying that PayPal will only seek to work with bitcoin companies that offer certain consumer protections.
Reitterating that PayPal needs to follow local laws and regulations in every market it serves, Eillson wrote:

“For this reason, virtual currency exchangers and administrators interested in working with PayPal in the future must secure the appropriate licenses and put anti-money laundering procedures in place.”

At the time, PayPal also suggested it is only seeking to promote bitcoin, stating that while other cryptocurrencies have been available for some time “only bitcoin has achieved significant scale” in the payments space to date.
Images via PayPal

PayPal Video Sparks Rumors About Potential Bitcoin Plans

Tom Sharkey (@tom_sharkey) | Published on September 8, 2014 at 19:05 BST

PayPal has sparked speculation in the wider digital currency community with the release of a new promotional video that makes reference to bitcoin.
The video, titled ‘PayPal Voices’, was published on the company’s official YouTube page today.
The one-minute promo features a string of actors who are described as “the voices of the people economy”, extolling the benefits of using PayPal. Bitcoin is mentioned just 10 seconds into the video in the following voiceover passage:

“Our phone is our wallet. We can spend bitcoin with a tap, without a pocket.”

The news provides the latest evidence that either the eBay-owned company or its mobile payment processing subsidiary Braintree might move to integrate bitcoin into an upcoming project.
First reported by The Wall Street Journal this August, such speculation was given yet another boost today in an article by Re/code that suggested Braintree’s announcement may come as soon as today.
Braintree was acquired by PayPal in September 2013. PayPal itself is a subsidiary of eBay, one of the largest e-commerce companies on the web. Outspoken bitcoin advocate Marc Andreessen sits on the board of eBay.

Speculation mounts

At the time of writing, PayPal’s only reference to bitcoin integration is the excerpt from the video.
Still, speculation has run rampant, with more than 400 comments about the video splattered across YouTube and reddit.
Notable bitcoin investor and SecondMarket executive chairman Barry Silbert has joined in discussing the significance of the video:

More information needed

Details are still sparse, and even if the video is proven to be authentic, it’s not entirely clear what plans PayPal has for the digital currency.
While the video does not necessarily mean that PayPal will integrate with bitcoin, the timing of both Re/code’s news and the video raises many questions.
The bitcoin community has been vocal about the relationship between PayPal and bitcoin in the past. Many argue that the digital nature of bitcoin lends itself perfectly to PayPal’s business model, while others contend that bitcoin doesn’t need the support of a centralized platform to flourish.
Whatever the case may be, a PayPal-bitcoin integration would certainly shake up the industry and bring the digital currency significantly more visibility with the general public.
CoinDesk is continuing to follow this developing story. At press time, neither PayPal nor Braintree had responded to requests for comment.
Image credit: Denys Prykhodov / Shutterstock.com

eBay Patent Filing for Currency Exchange System Included Bitcoin

Pete Rizzo (@pete_rizzo_) | Published on March 10, 2014 at 18:28 GMT | Companies, Law, News, Technology

A second eBay patent application has surfaced on the US Patent and Trademark Office database – further highlighting the online marketplace’s interest in digital currencies and digital currency processing systems.
Named ‘System and Method for Managing Transactions in a Digital Marketplace’, the application follows its “gift token” patent revealed on 19th December last year. Filed in December 2011, six months before its gift token filing, this document names bitcoin specifically.
The patent details eBay’s plan to create a currency module configured to manage the exchange of digital currencies, one that might require eBay to maintain or access an exchange rate for conversion.
Reads one patent section:

“The currency module 308 allows a user to trade one form of currency for another form of currency. [...] The digital currency may be used to pay for real-world financial obligations (e.g., bills) as well as for virtual-world obligation.”

The news supports the notion that eBay has been aware of, and thinking strategically about, digital currencies for some time.
eBay currently encourages the sale of virtual currencies on its Classified Ads platforms in the US and the UK, though it permits the sale of such items elsewhere on its site provided they are housed in physical items like hard drives or USB sticks.

Patent lists bitcoin as acceptable currency

The processing system would not be just for bitcoin alone, but rather a long example list of currencies that could be used on the proposed system.
This included US dollars, eBay bucks, now-defunct Facebook credits and bitcoins:
“A non-exhaustive and example list of currencies capable of being exchanged may include frequent flyer miles, loyalty and reward points (e.g., credit card reward points, hotel loyalty points, retail loyalty points), virtual currency, cash, Bitcoins, Facebook credits, eBay bucks, cash-equivalent currency (e.g., gift cards, travellers checks, cashier’s checks), and any other form of currency.”
Payment system 122, as detailed in the filing, would in turn allow bitcoin users to potentially “accumulate value in a commercial currency” on the site that would later be redeemed for goods and services on the eBay network.

eBay’s bitcoin speculation continues

The patent filing marks the second time in recent weeks that eBay has hinted its broader plans may include digital currencies, and adds to the growing history between the company and the digital currency.
Though he may have been speaking more broadly about digital forms of payment, eBay CEO John Donahoe has indicated as recently as 19th February that PayPal could pursue a digital wallet that holds multiple forms of currency.
Donahoe has been one of the more outspoken executives when it comes to addressing bitcoin. Last November, the exec stated he believes digital currency will become a “very powerful thing” that could one day factor into PayPal’s plans.
Image credit: Twin Design / Shutterstock.com

PayPal Likes Digital Currencies? Yawn

Ryan Galt (@twobitidiot) | Published on February 20, 2014 at 13:40 GMT | Analysis, Merchants, News, Wallets

It’s hard to not get frustrated when everyone starts jumping for joy after a televised interview in which eBay CEO John Donahue told Bloomberg that PayPal is building a digital wallet for multiple cryptocurrencies. Because, of course, it is. The e-payments giant would be silly not to.
Paypal, which is owned by eBay, is the pioneer in digital payments and they already accept over 25 foreign currencies – basically, all of the ones that matter, with the exception of the Chinese RMB.
New digital currencies like bitcoin will likely interact with PayPal’s systems in the same manner as existing fiat currencies – when they are big enough. That’s because, like Coinbase and BitPay, you would expect PayPal to lock-in fiat prices for merchants accepting bitcoin.
They would also be likely to batch transactions ‘off-block chain’ in order to cover transaction risks during the 10-minute confirmation window.

What they said

In the interview, Bloomberg’s Matt Miller told Donahue that he thinks digital payments like bitcoin will rule in the internet commerce of the future and have the potential to make PayPal defunct unless the company starts preparing now.
However, it is absurd to infer that PayPal is useless in the long-term, and neglects the fact that PayPal owns some serious e-commerce real-estate. This is like saying that Amazon, after utterly dominating the book industry, would never be able to move into electronics (or any other category that they have since dominated).
Miller speaks with an irritating certainty about bitcoin. It’s safe to call me a fanatic, but Miller is already in outer space on his way to the moon.
Finally, the idea of the “head start” PayPal would get for spinning off now makes some sense until you consider what he is really saying. This is, that PayPal should essentially spin-off to the highest bidder before it dies an inevitable death. Is Miller suggesting a perverse corporate pump and dump?
Donahue’s no fool. He coolly pointed out there’s nothing that’s holding PayPal back from integrating digital payments today as part of eBay, in fact:

“PayPal is pursuing digital payments and is the leading digital payments alternative in many different environments. So it’s not a matter of eBay holding PayPal back.”

What Donahue is really saying of course is: we will do with bitcoin what we want, when we want to, because we are really, really good at payments.
He doesn’t need to utter the word ‘bitcoin’, because that particular currency would be lower volume for PayPal today than the Russian ruble. Miller is like a dog with a bone though: “Until everyone starts using bitcoin, and then there will be no reason to use PayPal.”
Then Donahue responded with the bombshell:

“[That is just what] PayPal is doing in building a wallet that can hold multiple types of digital currency.”

So, we can assume that, as soon as cryptocurrencies are actually worth PayPal’s time and regulatory uncertainties over the commercial use of cryptocurrencies are removed, the company will integrate them into their system. And will very likely be a force from day one.
It’s really not a matter of if PayPal enters the bitcoin industry, but when and, more importantly, how.

Build or Buy?

PayPal has enormous resources at its disposal in terms of financial and human capital, but the company seems to have a much better option than building their own bitcoin products from the ground up – on the merchant side, at least.
If PayPal could acquire BitPay, it would be a great deal for both parties.
Not just because BitPay is the leading bitcoin payment processing company and that PayPal would gain all their expertise, while dotting the global map with locations that accept the virtual currency overnight.
Or because their joint DBA (‘doing business as’ title) is already flawless – what’s not to like about BitPayPal?
But because BitPay’s business model would compliment, not cannibalize, existing PayPal sales.
A lot of people have the misconception that bitcoin will crush PayPal’s margins. That’s not likely.
PayPal could drop their prices for bitcoin transactions overnight by a full percentage point and make the same gross margins, because the company wouldn’t be exposed to the same interchange or credit card fees.
In addition, PayPal could become an instant bitcoin market maker.

Contrasting cultures

BitPay is really two businesses: a SaaS (software as a service) company that offers merchant services and a ‘long’ hedge fund that benefits from jumps in the price of bitcoin.
Multiple sources have told me the company sits on over 40,000 bitcoins. That’s a lot of exposure to price swings, but it is also a valuable asset.
Ownership of BitPay would allow a company like PayPal to kill two birds with one stone via an acquisition: acquire the talent and IP and seamlessly acquire the necessary underlying currency.
Will this acquisition actually happen, though? Probably not. But the move would make a lot of sense for Paypal.
Ryan Galt is a blogger, entrepreneur and freelance opinion writer for CoinDesk. His opinions do not necessarily reflect those of CoinDesk. You may email him at 2bitidiot@gmail.com, or follow him on twitter @twobitidiot.
Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.
E-commerce image via Shutterstock