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Fintech Fridays: 30/07/2021

​Paypal unveils ambitious plans for next quarter and Binance's regulatory troubles explained This week of Fintech Fridays, we will be examining Paypal’s venture into the cryptocurrency space, with their new “super app” and we will also be inspecting why and how Binance has acquired major regulatory pressure. Announced on Friday during Paypal’s Q2 2021 investor update call today, CEO Dan Schulman has disclosed that their “super app,” is code complete is ready to be pushed into the market in the next 2 months. This new app will entail a new wallet system, which would provide high yield savings, early access to direct deposit funds, additional cryptocurrency capabilities and also shopping cashback tools through the acquisition of Honey in 2019 for $4 billion. Directing their next step from just beyond a payment facilitator, Schulman also has revealed that there will be messaging functionality outside of peer-to-peer payments, where the plan was to continue to iterate on product experience. This app would completely redevelop the user interface it has now and would also contribute to their plans of doing their own buy now and pay later function. Through this change, Schulman also notes that each app will be personalized to each user's specifications, therefore no two apps will be the same and advanced AI and machine earnings would be employed to ensure this. What is most interesting is how they will also integrate their system to incorporate cryptocurrency. With crypto adoption not lessening, Paypal has warranted its increasing popularity, through its decision to increase any crypto purchase limit through Paypal from $20,000 to $100,000. The new features concerning cryptocurrency would allow users to check out at millions of online businesses using cryptocurrency. Currently, all customers with cryptocurrency holdings in the U.S are now able to directly convert and sell their cryptocurrency through Paypal at the time of the checkout and settle the transaction through U.S dollars. However, this service can currently only support Bitcoin, Litecoin, Ethereum, and Bitcoin Cash. Paypal currently holds more than 400 million user accounts as of June 30 and has facilitated more than $311 billion in total payment volume for the second quarter of 2021.

Binance, the world’s largest cryptocurrency exchange is seeking licenses and multiple headquarters in response to a slew of warnings issued one after another across multiple jurisdictions in which they operate. Binance’s troubles started back in May when a report from Bloomberg stated that the IRS - Internal Revenue Service and the DOJ - Department of Justice were investigating Binance; since then, their journey has continued on a downhill slope. In late June, a South African bank barred its clients from purchasing digital currencies on Binance because they claimed that Binance was not compliant. A few days later, Japan’s financial watchdog issued Binance a warning saying that Binance was operating in Japan without permission. Shortly after that, Thailand’s Securities and Exchange Commission (SEC) filed a complaint against Binance for operating in their country without the necessary license; and then the financial regulator in the Cayman islands said, “Binance Group and Binance Holdings Limited are not registered, licensed, regulated or otherwise authorized by the Authority to operate a cryptocurrency exchange from or within the Cayman Islands.” Since the start of July, the platform could no longer support the deposit and withdrawal of UK pounds following a ban from the U.K.’s Financial Conduct Authority. Soon after, direct EURO deposits were also suspended from the platform. In response to the barrage of regulatory scrutiny from all angles, Binance CEO Zhao Changpeng has raised the prospect of being succeeded by a global executive with strong regulatory background in order to help pivot Binance towards becoming a regulated financial institution. “In the last four years, we were a start-up. Now, we want to be a financial institution,” said Zhao in a recent media conference call. Zhao has also said “The adoption and development of crypto has many parallels with that of the car. When the car was first invented, there weren’t any traffic laws, traffic lights or even safety belts. Laws and guidelines were developed along the way as the cars were running on the road.” According to Zhao, Binance has grown–and looks to continue growing–its international compliance team. From the looks of it, Binance is banking on those compliance hires and their relationships with financial regulators to pull Binance out of the trouble it is in with regulators. Can they recover fast enough to maintain their top spot as the largest cryptocurrency exchange? Only time will tell. References:

The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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