Paypal Holds cryptocurrency
PayPal, a leading global payment giant, revealed in its annual report to the US Securities and Exchange Commission (SEC) that it held $604 million of cryptocurrencies for its customers by the end of 2022. The majority of the holdings were in Bitcoin and Ethereum, which accounted for almost 90% of the figure. Specifically, PayPal held $291 million in BTC, $250 million in ETH, and $63 million in Litecoin and Bitcoin Cash as of December 31, 2022.
The $604 million in crypto holdings is down from the $690 million that the company held as of September 2022. This decrease can be attributed to falling cryptocurrency prices and reduced user trust in the industry following the disastrous collapse of cryptocurrency exchange FTX. Despite this decline, PayPal's crypto holdings still account for 67% of the company's total financial liabilities, which amounted to $902 million as of December 31, 2022. In comparison, the company's total financial assets stood at more than $25 billion.
PayPal launched its cryptocurrency service in October 2020, which allows US-based customers to buy and sell specific cryptocurrencies. Since then, the company has expanded the service to the UK and has plans for further international expansion. The disclosure of the breakdown of its crypto holdings in the annual report marks the first time PayPal has provided this level of detail, as its previous annual financial report did not disclose its crypto assets. The company said it felt the need to include the breakdown of its crypto holdings due to recent developments in the industry and the unique risks associated with cryptocurrencies, such as technological, legal, and regulatory risks.
To safeguard the digital assets held for the benefit of its customers, PayPal stores the crypto assets through a third-party custodian. The company requires the custodian to segregate customer assets and not mix them with proprietary or other assets. However, PayPal acknowledged in the filing that it cannot be certain that these contractual obligations will be effective in preventing such assets from being treated as part of the custodian's estate under bankruptcy or other insolvency law.
In addition to the disclosure of its crypto holdings, PayPal also announced that its CEO, Dan Schulman, will be leaving the company at the end of the year. Schulman has been leading the online payments firm since it split from eBay in 2015. Furthermore, PayPal recently reduced its workforce by 7%, which translates to around 2,000 employees, as part of its ongoing effort to strengthen and reshape the company in a challenging macro-economic environment.