PayPal has published its annual report for 2022. The balance sheet includes $604 million in cryptocurrency held in custody on behalf of clients.
Generally, assets held in custody on behalf of clients do not appear on the balance sheet. However, at the end of March 2022, the SEC published a staff accounting bulletin that said crypto-assets carry additional risks and hence assets held in custody must be disclosed on the balance sheet. Invariably the same figure will appear as both an asset and a liability.
The PayPal balance comprises $291 million in Bitcoin and $250 million in Ethereum, with the balance made up of other crypto. The total of $604 million represents less than one percent of PayPal’s balance sheet and is down from $690 million at the end of September 2022.
To put the PayPal figure in context, at the end of September, the equivalent amount on Robinhood’s balance sheet was $9.3 billion and Coinbase held $95 billion.
PayPal also included cryptocurrency under its risk factor disclosures. This includes the following statement: “if the SEC were to assert that any of the cryptocurrencies we support are securities, the SEC could assert that our activities involving that cryptocurrency require securities broker-dealer registration or other obligations under the federal securities laws.”
In 2020 PayPal enabled its clients to access cryptocurrencies through a deal with Paxos. And from March 2021, U.S. merchants were able to accept PayPal-held cryptocurrencies for payment.
A survey of 2,000 retailers conducted by Deloitte and PayPal last year found that 85% anticipate cryptocurrency being ubiquitous within five years.
