According to a recent filing with the US Securities and Exchange Commission, the amount of cryptocurrency being held by online payment giant PayPal increased by 56% during the first quarter of 2023. As of March 31, 2023, the company claimed a total of $943 million in crypto assets, up from the $604 million reported on December 31, 2022.
Bitcoin holdings saw the greatest rise, of over 70%, from a reported $291 million at the end of Q4 2022, to $499 million at the end of Q1 2023. Holdings of ether rose by just a shade under 45%, from $250 million to $362 million.
Since late 2020 PayPal has enabled customers in certain markets to buy, hold and sell certain cryptocurrencies, and has since added functionality to send, receive, transfer, and use the proceeds from sales of cryptocurrencies to pay for purchases at checkout.
The other cryptocurrencies supported by the platform are bitcoin cash and litecoin, which together saw holdings increase from $63 million to $82 million, or just over 30%.
The filing also revealed that the actual crypto assets and private keys are held by a single third-party custodian in an account in PayPal’s name. PayPal then maintains internal records of the amounts of each of the supported cryptocurrencies held by individual customers.
While acknowledging that this created a “concentration risk in the event the custodian is not able to perform in accordance with our agreement,” the report noted that there had been no such failure or loss event to date.
“As of March 31, 2023, the Company has not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.”
The entry of trusted payment processors like PayPal into the cryptocurrency sphere has driven crypto adoption beyond its core supporters and introduced a whole new demographic to digital assets. In part this is down to a simplified onboarding experience, removing the need to remember long cryptographic keys and wallet addresses.
PayPal rival Stripe recently implemented a fiat-to-crypto on-ramp, enabling Web3 companies to get crypto directly into customers’ hands at the “precise moment they need it.”
And as Observers previously reported, Elon Musk also intends to incorporate a payments platform into Twitter and has hinted that this too could eventually gain crypto functionality.
While we would always recommend holding one’s tokens in a non-custodial wallet, anything that makes it easier for the general public to get crypto exposure is a positive step. However, it will be interesting to Observe whether PayPal’s crypto holdings continue to rise, or if customers choose to transfer their tokens elsewhere as they learn more about their new assets.