When Facebook’s ambitious cryptocurrency project Libra launched in June, a total of 28 companies signed on to be part of The Libra Association. The consortium of companies, including PayPal, Visa, MasterCard, and Coinbase, would help build and operate services around the project.
In October, PayPal became the first company to walk away from The Libra Association without citing a specific reason, only that it decided “to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations.”
Last week, PayPal CEO Dan Schulman stopped by Fortune’s offices to meet with several reporters and editors. We spoke about a wide variety of subjects — so wide, in fact, that I learned he does martial arts in the morning and his resting heart rate is 48 beats per minute. (Compare that with mine, which is a coffee-fueled 71. 💀)
But my questions focused on PayPal’s relationship with Libra and the company’s own work in the cryptocurrency realm. Here’s what Schulman said.
Why did you decide to withdraw from The Libra Association?
When David Marcus [Facebook’s head of Libra] came to talk to us about Libra initially, he framed it in ways that were appealing to us about financial inclusion. We’re always exploring the next generation of technologies — like blockchain infrastructure to do things more efficiently. And you know, we’d like to learn more about it. All of us were interested in learning more. As we learned more about [Libra] and saw the amount of things that were still left to do and the amount of things we still had to do on our own roadmap outside of Libra, we said, “You know, we think if we focus on our own roadmap, we’d be able to advance financial inclusion faster than if we put all these resources against Libra.”
It wasn’t an acrimonious divorce or anything like that. It’s just that they will start going down a road that we’re very interested in looking at and monitoring, and maybe later, there are ways we can work together. I wish them the best of luck on it.
Was it because you were spooked by the regulatory scrutiny?
Regulatory and compliance, for us, is foundational. But we have an extremely robust relationship with every regulator out there. We are extremely trusted on that. That wasn’t really what spooked us on it. It was just about, “Where do we want to put our attention, and what do we want to do today to advance our mission?” Once they start figuring things out, we’ll take another look at where they are.
Earlier this year, PayPal’s CFO John Rainey said the company had teams working on blockchain and cryptocurrency. Can you share a little more about what they’re working on?
Yes and no. Some of this is competitive, and we don’t really want to …
Is it competitive with Libra?
No, it’s not necessarily competitive with Libra. It’s just a competitive advantage. Like, you might ask what’s our next product that’s coming out or what’s our next acquisition. I probably can’t tell you about those either.
We think there’s a lot of promise to blockchain technology. It’s intriguing to us, but it really needs to do something that the traditional rails can’t do. Most people think that blockchain is about efficiency, but the system today is pretty efficient. There are middlemen sometimes in between, but the rails of it are pretty efficient. So we think a lot of the neat stuff that can happen on blockchain is around identity, for example.
It’s about the applications on top of it, not necessarily using it to lower the cost by one-eighth of one eighth of a fraction. By the way, if it does turn out to be a lower-cost infrastructure, all of us will move to it.
On the crypto side, it’s still very volatile, and therefore, we don’t have much demand for it by merchants because merchants operate on very small margins. And what they have to do is immediately turn it into fiat, and there’s a fee for turning it into fiat, so any advantage in cost is typically eaten up by that conversion fee. Until it becomes less volatile, it won’t be a currency that is widely accepted by merchants on the web — not the dark web, but the web.
That doesn’t mean that I don’t think crypto is an interesting idea and that people are trading it quite a bit. It’s more commodity-like than it is cash-like right now. But you can think of use cases in different countries and different places where it can be more stable than the alternatives.
Do you personally own any cryptocurrencies?