News emerged this week that PayPal is nibbling around the edges of blockchain and cryptocurrency. The company has introduced an employee blockchain-based rewards system, as first reported by Cheddar, and renewed a partnership to accept cash withdrawals from Coinbase customers in the U.S.
The employee program was launched by PayPal's San Jose innovation lab. Introduced in mid-November, the program was developed over six months by 25 PayPal employees. Employees earn tokens by participating in innovation-related programs and by generating new ideas. They can then redeem these tokens for "experiences" with PayPal executives. All transactions are recorded on a ledger viewable by employees. Previous programs run by the innovation lab, including voice technology, have later been implemented in PayPal's core products.
Meanwhile, Coinbase announced the renewal of a partnership with PayPal that had been paused earlier this year. Per Coinbase: "U.S. customers can instantly withdraw Coinbase balances to PayPal, providing even faster access to their funds through one of the world’s easiest and most widely-used payment platforms. These withdrawals are not only fast; they’re free and incur no fees." Coinbase touted the PayPal instant withdrawal as being faster than bank ACH or Federal Wire withdrawals, which can take up to 2 additional days.
These new moves by PayPal do not represent a change in the company's overall stance towards cryptocurrency. PayPal CFO John Rainey had commented in May 2018 that "Right now, we don’t see a lot of interest from our merchants. But if it’s something that stabilizes in the future and is a better currency, then we’ll certainly support that.” The lack of merchant interest is due to the volatility of cryptocurrency. Per Rainey, "If you’re a merchant and you have, let’s say, a 10 percent margin on a product that you sell and you accept bitcoin, for example, and the very next day it moves 15 percent, you’re now underwater on that transaction."
PayPal's steadfast refusal to integrate cryptocurrency into its core merchant or consumer offerings comes despite more aggressive moves by challengers. Companies such as Square's Cash App and Robinhood embraced cryptocurrency in 2018. It remains to be seen whether the first-mover or wait-and-see approach will win the marathon.