PayPal crypto reserves reach $604 million
by Tom Nyarunda
PayPal has revealed it held massive crypto holdings for its customers totalling $604 million as of December 31, 2022. According to an annual report, the global payment giant filed with the US Securities and Exchange Commission (SEC), Bitcoin (BTC) and Ether (ETH) comprised more than 60% of PayPal crypto reserves.
The $604 million worth of crypto holdings the firm held at the end of 2022 is slightly lower than the $690 million held as of September 2022. The significant drop could have resulted from unstable crypto prices and dwindling user trust associated with the devastating collapse of the FTX cryptocurrency exchange.
PayPal crypto reserves are 67% of its financial liabilities
The $604M worth of crypto comprised $291 million in Bitcoin (BTC) and $250 million in ether (ETH), with Litecoin (LTC) and Bitcoin Cash (BCH) making up the balance of $63 million. Per the report, PayPal crypto reserves account for 67% of its $902 million total financial liabilities. The filing further indicated that PayPal’s total financial assets were $25 billion.
The global payment giant introduced a crypto buy and sell service for its US-based customers involving only specific cryptocurrencies in October 2020. Nonetheless, following the SEC's requirement via Staff Accounting Bulletin No. 121 (SAB 121) in March last year, PayPal only recently started disclosing specific holdings of different cryptocurrencies in its SEC filings. While the company's crypto service has existed since 2020, it was only in June 2021 that the firm allowed users to withdraw crypto from the platform.
Used a third-party custodian
While acknowledging the specific technological, legal, and regulatory risks associated with dealing in cryptocurrencies, the fact that a PayPal crypto asset safeguarding liability reflected its obligation to protect its customers’ assets wasn’t lost to the company.
The company, therefore, revealed in the filing that it used a third-party custodian to store the customers' digital assets. Nonetheless, PayPal reiterated that it contractually required the custodian to segregate its customer assets to prevent such assets from being considered a part of the custodian's estate should bankruptcy or insolvency occur.
PayPal Vice President Richard Nash indicated recently that the company was taking measures to reduce operational costs due to the ongoing market rout. The company was recently said to have reduced its workforce by at least 2,000 people to "strengthen" and "reshape" due to a "challenging macro-economic environment".
As a way of integrating blockchain and PayPal cryptocurrency services into the platform, the firm introduced a hold-and-sold Bitcoin service for its US-based customers in November 2020. The offerings would also include central bank digital currencies (CBDC).
Tom is a freelance writer with over 15-years’ experience in content creation, blog writing, and SEO specializing in the blockchain and cryptocurrency niche. He is a philosophical figurehead who believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.