Briefly,
On Monday, PayPal announced it had purchased Tel Aviv-based Curv, a company that uses a unique form of cryptography to safeguard Bitcoin and other digital assets stockpiles. This comes as another sign of PayPal’s growing crypto ambitions, and indicates its plan to exploit the fast-changing world of financial technology.
PayPal reportedly sold Curv for nearly $200 million in a press release announcing the deal.
PayPal made two recent purchases to fuel its push into the small business payments market: An $8.5 billion agreement to buy coupon platform Honey in 2019 and a $2.2 billion acquisition of payment processor iZettle the following year.
In terms of the size of its acquisition, Curv stands out as the first major crypto deal for PayPal. The company has said that its service, launched last November, has been tremendously successful.
Curv is one of a growing number of companies, including Anchorage and BitGo (a company that PayPal explored buying last year), that help banks and others protect their cryptocurrency holdings from hackers.
MPC is a pioneering technology that ensures the security of digital wallets by utilising multi-party computation or MPC. In traditional storage techniques, the key to a digital wallet is usually scattered in various locations, but MPC relies on mathematics and cloud computing to ensure that it is protected.
Curv’s Itay Malinger, a veteran of web security giant Akamai, says that MPC is now possible thanks to recent advances in mathematics, and that Curv’s solution gives users both total security and easy access to crypto assets.
Jose Fernandez da Ponte, VP and GM of PayPal’s blockchain and digital currency group, told Decrypt that PayPal has been in talks with Curv for nearly a year, and sought to acquire its 40-person team in part because of its technical sophistication. He said Malinger will stay at PayPal, but that PayPal is not disclosing specific titles or roles.
According to Fernandez da Ponte, Curv’s technology will be used by PayPal as a security layer for its own digital assets, rather than as a custody service, which involves charging third parties to safeguard their assets. Rather than relying on Curv, PayPal will instead use its technology to securely move assets across borders.
“One way PayPal might move assets from one custody provider to another would be to imagine a world in which PayPal had different custody providers,” he explained.
This indicates PayPal’s plan to expand its brick-and-mortar crypto business as well as utilise blockchain technology on a global scale.
Central banks and PayPal are the future of finance
According to Fernandez da Ponte, Curv’s acquisition by PayPal is part of a larger plan to facilitate financial inclusion. Dan Schulman, the company’s CEO, sees PayPal’s crypto initiatives as part of this same goal.
Even in countries like Argentina and Venezuela, whose economies have been ravaged by hyperinflation and government malfeasance, only a small proportion of citizens have opted for Bitcoin as a currency refuge—preferring to rely on the US dollar instead. Bitcoin enthusiasts, on the other hand, favour phrases like “financial inclusion” and “democratizing finance.”
According to Fernandez da Ponte, crypto has the greatest chance of making finance more fair and economical outside of peer-to-peer consumer transactions. He believes that merchants, including PayPal’s millions of small business clients, could see lower transaction costs that would make financial systems cheaper and more just.
As Schulman has pointed out, payment transaction costs—those charged by banks, credit card networks and others—have remained high even as a multitude of new digital efficiencies have appeared. These costs are especially difficult on the poor and those looking to move money across borders, which is why they are passed on to consumers.
PayPal believes that developing a new worldwide payment system powered in part by blockchain will significantly simplify how people and businesses move money around.
While PayPal has kept mum about which blockchain technology it will use to build this infrastructure, Fernandez da Ponte said that it must be capable of “high throughput” in the form of thousands of transactions per second. He singled out blockchains like Ethereum, Stellar, Algorand and Solana as potential candidates, but did not endorse any of them.
According to Fernandez da Ponte, PayPal’s crypto ambitions are closely linked to the speed at which central banks jump on the digital currency bandwagon.
The Bank of England is currently experimenting with digital versions of its money, while the People’s Bank of China is already encouraging its citizens to use a digital yuan. Meanwhile, Mastercard is helping central banks and regulators around the world to create so-called “sandboxes” that will let digital versions of national currencies be used in a controlled fashion.
This suggests that government-backed digital currencies are only a matter of time before becoming a part of everyday life. In turn, PayPal’s recent crypto investments might help the company play a key role in supplying the next generation of financial plumbing between merchants and consumers.
Dan Schulman, the CEO of PayPal, spoke with Decrypt about crypto at the end of March.
