Following its debut of cryptocurrency purchases, PayPal is reportedly considering acquisitions of crypto companies. One possible purchase could be coin custodian BitGo, a major player in the digital currency space.
According to Bloomberg, PayPal Holdings has been in talks to acquire BitGo, a digital currency “custodian” company. BitGo helps clients securely store large amounts of cryptocurrency. BitGo also provides up to $100 million in insurance for customers, backed by big-time insurer Lloyds of London.
The acquisition would be a notable expansion of PayPal’s foray into crypto, especially after the greenlighting of crypto purchases on Oct. 21. According to Bloomberg, other companies may be in the mix as well. PayPal is also planning to partner with the Paxos Trust Company, a regulated crypto provider.
According to sources who wished to remain anonymous and cited by Bloomberg, PayPal and BitGo could reach a deal within weeks. A source noted that this was not a sure thing, and PayPal could go explore other acquisitions.
Get Up and BitGo
BitGo has been a majorly successful company in crypto. In 2018, the custodian raised about $58 million and currently serves clients such as centralized finance company Nexo. The company has pitched itself as a security solution to institutional investors, making it an attractive choice for large, regulated companies like PayPal.
No less attractive is the fact that the firm’s security relies on “cold storage” wallets, which means that keys to the accounts only exist offline. They also use offline multiple signature wallets that are more difficult to hack.
PayPal’s Big Bet
After the announcement that customers can buy, sell, and hold digital currencies, Paypal’s stock price soared to all-time highs (and then retraced the following day).
PayPal now allows services for several cryptocurrencies including bitcoin, ether, Bitcoin Cash and Litecoin. Users can use their virtual currencies to shop at 26 million vendors. In past years, the lack of convenience for paying with cryptocurrencies appeared to be a major obstacle to widespread adoption. On the heels of the news, bitcoin rocketed past $13,000 for the first time in over a year.
Not everyone was elated by PayPal’s crypto-positive news, however. Some saw this as just another middle man between users and their crypto. Others pointed out that PayPal does not presently allow for the transfer of crypto off PayPal’s site to private wallets and does not give users private keys. The old adage, “not your keys, not your crypto,” warns of the danger of this set-up.
This PayPal thing could be the catalyst we have been waiting for. No matter if you have your private keys or not. It will help us spread the virus, and as soon as people realize that they can be their OWN BANK, they will make the switch, and that will start the real party. $BTC
— Blackbeard (@crypto_blkbeard) October 21, 2020
Luckily, PayPal’s acquisition of BitGo, should it go through, could be very positive news for the naysayers. BitGo’s custodial services could be integrated with PayPal to some capacity. This could theoretically insure crypto on PayPal and make the payments company feel secure enough to allow transfers and hand over private keys.
Meanwhile, news of mainstream companies diving into the crypto space, like those that are buying up bitcoin, continues to mount.