On October 21, 2020, PayPal, the world's largest payment company, announced that it supports Bitcoin payments. This is the biggest event in 12 years since the release of the Bitcoin white paper on October 31, 2008. According to Google Scholar, the Bitcoin white paper has been cited more than 12,000 times in various books and papers over the past 12 years. However, due to chronic problems such as large price fluctuations and slow processing speed of Bitcoin, it is generally believed that it is unable to undertake the functions of "exchange medium" and "value measure" among the three major functions of currency, and can only be used as a "means of value storage". The current status of "digital gold".

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The History of PayPal and Its Influence: Peter Thiel, Elon Musk, and eBay

To understand the influence of PayPal's cooperation with Bitcoin, you first need to understand the history of PayPal's development. PayPal was founded in 1998, Peter Thiel is the co-founder of the company. In 2000, Tesla founder Elon Musk acquired PayPal and promoted it to go public in 2002. After PayPal went public, eBay immediately spent $1.5 billion to acquire it from Musk.

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Bitcoin: From the Age of Investment to the Age of Storage

What will happen when such PayPal joins hands with Bitcoin? It is not difficult to predict that after cooperating with PayPal, a payment platform, Bitcoin will have the function of value exchange, and its use and circulation will be further expanded. Moreover, the cooperation between the two also means that users can exchange and store Bitcoin at any time without going through a cryptocurrency exchange, opening a new era.

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The Competition Around Bitcoin: Promoting Collaboration with the Digital Finance Industry

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The Intersection of Bitcoin and CBDC: Who Will Be the Digital Universal Currency?

Digital financial platforms such as PayPal, KakaoPay, and NaverPay are also the main circulation channels for central bank digital currencies (CBDC) that countries are preparing to issue. After the digital financial platform supports Bitcoin payment and at the same time supports central bank digital currency (CBDC) payment, the two will inevitably overlap.

In this way, the fiat currencies of various countries can revolve around Bitcoin, which is used as an intermediary to calculate the exchange rate. For a long time, people have been accustomed to refer to the currency with higher power as the universal currency. In the age of simulated finance, people artificially choose the currency of a specific country to replace gold, thus achieving the so-called universal currency. But with the advent of the digital financial era, which country's digital currency (CBDC) can become a truly universal currency in the face of the silent Bitcoin? This will become a new distress for people.

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PayPal Manifesto: The Opening of the Era of Connecting CeFi and DeFi

In other words, PayPal's declaration is not only a big event for a single company, but also heralds the opening of the era of CeFi and DeFi interconnection. Although PayPal's direct influence is limited to its 350 million registered users, its indirect influence is enough to affect the entire financial industry through all the new digital financial companies that compete with it and the traditional financial networks that cooperate with it. If Bitcoin cooperates with PayPal to realize the expansion of usage scenarios, it can also promote countries around the world to change the previous system design model that only focused on crime prevention for the DeFi industry, so that countries have to change their CeFi strategy and actively seek cooperation with DeFi.

The closer CeFi and DeFi are connected, the more people will pay attention to the changes in the price of Bitcoin visible to the naked eye. But the invisible effects are more important than the phenomena that people can see. Faced with this situation, Satoshi Nakamoto, who has concealed his true identity for 12 years in order to realize the ideal of decentralization, does not know how to feel.

Kim Moon-soo Vice President of aSSIST Graduate School of Business and ABC MBA Director Professor