In brief

  • PayPal plans to treat crypto as a “funding source” for transactions.
  • CEO Dan Schulman says this will lead to Bitcoin "being less of just an asset class and more into a currency."
  • PayPal plans to use fiat as an intermediary when users make payments to merchants in Bitcoin.

Is Bitcoin really “digital gold”? Dan Schulman, CEO of the digital payments giant PayPal, doesn’t think so. In an interview today with CNBC, Schulman explored PayPal’s plans to expand into cryptocurrencies, and doubled down on the idea that Bitcoin is more than just an asset.

“As [cryptocurrencies] become more and more utilized in everyday commerce,” said Schulman, “I think they start to move from being less of just an asset class and more into a currency. And when you start to move crypto as a potential funding instrument, I think that bolsters its utility, and stabilizes it as well. It becomes less volatile because it can be used everyday, in your purchases.”

The interview was with Andrew Ross Sorkin, who anchors Squawk Box, and the questions had to do with PayPal’s recent decision to allow its users to pay in crypto purchased on-platform.

But beyond giving what was essentially a sales pitch, Schulman elaborated on how exactly Bitcoin operates on the PayPal platform, and outlined some of the system’s built-in limitations

For one, users can only pay in cryptocurrency purchased through PayPal, and can’t transfer that crypto out to any other wallet. Also, merchants never actually receive any of that crypto, since PayPal converts it to fiat currency the moment it’s transacted. (It’s not unlike the way most “crypto debit cards” work as well.)

Still, it’s a clever way to streamline the payment process for people who want to “spend” a little crypto on something like a slice of pizza, but it’s also, crucially, not a true crypto transaction between buyer and seller, since PayPal is always working as an intermediary.

Next year, Schulman explained, users will be able to buy things with crypto from anyone who accepts money via PayPal (right now, this is only available in the US). Reiterating some of what the company has already been pushing in press releases over the past two months, Schulman said that “early next year, we’re going to allow cryptocurrencies to be a funding source for any transaction happening on all 28 million of our merchants.”

“When you start to move crypto as a potential funding instrument I think that bolsters its utility and stabilizes it as well—because it can be used everyday in your purchases,” said Schulman.

This is technically true, in that PayPal users can hold crypto and pay for things within the service, but it’s by no means a fully disintermediated system; fiat currency is still crucial to how PayPal handles digital currencies, for now.

Disclaimer

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.