This is perhaps my most important post. If you don't understand why doing crypto business with Paypal is bad, for you and for crypto in general, read, read, read.
This was a comment to a previous article I wrote entitled
Don't Get Your Bitcoin from CashApp Either
in which I discussed why you shouldn't buy your bitcoin from CashApp.
I am confused, if you can’t withdraw crypto then how does PayPal cash it? I mean why are they just taking your crypto and keeping them.
Let's look into the stuff we know for sure before we get into any speculation.
Bitcoin's real value is not its value versus the US dollar. Bitcoin is valuable because of its sovereignty. Think of it this way:
If you have $100 billion in US dollars parked in US institutions, you're a rich person. But those riches can be taken from you at any moment through taxes or confiscation.
If you have $100 billion in bitcoin parked in your own custodial wallets, you're a country. You don't have to follow US or any other law, and you could theoretically begin paying dues to the World Bank and transact with them as if you were Kenya or Canada or Japan.
No doubt institutions like Paypal understand the custodial value of bitcoin. They are too intertwined with the US to exercise its full value, but they realize the leverage that custody gives them.
Even if Paypal does not exercise the custodial value in a political way, they could still do it in an economic way. There's nothing to stop Paypal from putting their bitcoin into a protocol like Aave, Compound or EasyFi, earning the interest rate from it and also borrowing based on it. Crypto fractional reserve banking. Multiplies their value as a company many times over and makes them competitive with any bank, possibly even central banks.
They could create their own defi app with undercollateralized loans and give themselves virtually unlimited spending power based on everybody else's bitcoin. The only reason they won't is because they know that would piss off the US (the bankers who control the US), and they'd find themselves in court very quickly for tax evasion or treason or treavasion or something. Those fags in the regulatory office would make something up.
Because Paypal never gives its users the private keys to the bitcoin, it shares none of this power with any Paypal user. Most of those dumbshits don't even know they have it.
Honestly, now that I've explained that, I don't think I need to go into any speculative "conspiratorial" reasons that Paypal wants to custody and silo bitcoin. Use your imagination. Imagine you, as an individual or company owner, could legitimately compete with world banks and governments rather than having to work with them or bow to their force of law. You'd no longer have to negotiate for or protest against stuff you thought was unfair. You could just create your own society where those things don't exist. You could create a sustainable physical army just like Paypal is creating an army of consumers that will maintain the value of its bitcoin without ever touching its custodial value.
So there you go. That's why Paypal is custodying and siloing bitcoin. They will get as much as they can, and when the price goes up and the regulatory hammer comes down, they'll trade it for trillions of digital US dollars, most likely.
That's if the government doesn't just take it from them first. Schulman doesn't strike me as a fighter. He'd bend over and just give it up.
