As the MIA Coin and NYCCoin fraud rages on, one must think back and glean insights on how we got here. Whatever (!) Is going on down in Miami, seems to be leaching into New York.
Yes, the rumors are true, Interlocking Board Directorates likely participated in PayPal's Conditional Bitlicense COVID-19 earnings manipulation scheme. Failure to rectify the matter racks up to one of the largest Obstruction of Justice instances of modern virtual currency times.
Graduate research conducted over the last six years by preeminent global industry scholars, who embody a strong sense of integrity and pride in the social importance and credibility of good institutional design, tease out the following incidents.
With friendly intentions, there is no way out of us moving forward.
Corruption occurs when the private search for economic advantage and personal advancement clashes with laws and norms that condemn such behavior. Further complicating the picture, some illegal corrupt transactions drain public resources away from education, health care, and effective infrastructure—the kinds of investments that can improve economic performance and raise living standards for all.
Perhaps even more significant, there is no reason to think that PayPal, one of the more convenient and commonly-used online payment methods out there, will behave any better given their clear anti-cryptocurrency policy history. Paypal will likely further exploit their monopoly position and risk undermining a pure environment that maximizes the socially beneficial conditions of virtual currencies.
Our estimation strategy so far has been predicated on the assumption that political and legal institutions affect sustainability directly and that the effect of corruption can be estimated conditionally on the institutional context.
As we previously reported, it is perhaps no coincidence that the systemic risk to cryptocurrency and blockchain systems are tethered to activities of BitLicensees.
The cost of corruption is greater than the sum of lost money: distortions in spending priorities undermine the ability of the state to promote sustainable and inclusive growth. This is possible in a framework already characterized by "weak law" that creates both a certain alteration of the rules of the market and perverse dynamics distorting the economy and inhibiting free competition.
PayPal’s Crypto Corruption
The heads of enterprises must curb corruption by setting a clear tone at the top. A statement from the founding CEO of Paypal Holdings Inc., Bill Harris, described Bitcoin as a “scam” and a “colossal pump-and-dump scheme”. “I’m tired of saying, ‘Be careful, it’s speculative.’ Then, ‘Be careful, it’s gambling.’ Then, ‘Be careful, it’s a bubble.’ Okay, I’ll say it: Bitcoin is a scam,” he wrote in June 2019.
Later in October 2019 Fortune asked PayPal’s current CEO, Daniel Schulman if he could share some details of the projects Paypal is working on. However, he replied: “Yes and no. Some of this is competitive, and we don’t really want to,” but noted that what Paypal is working on is “not necessarily competitive with Libra.”
Emphasizing that cryptocurrency is “still very volatile,” the CEO revealed, “we don’t have much demand for it by merchants because merchants operate on very small margins.” He continued: “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.”
PayPal’s fundamental longtime assault on the crypto industry policy was to freeze user accounts connected with any cryptocurrency-related activity. While some people may consider this to be borderline illegal, the company can close user accounts or freeze funds for extended periods of time whenever they feel the need to.
In less than a year, everything changed for PayPal with the October 2020 announcement of achieving another regulatory first: through Paxos, PayPal has been granted the first virtual currency conditional license from the New York State Department of Financial Services. It seems that PayPal’s dance with “regulatory arbitrage” now engages the ability to provide crypto to their customers.
Turn this matter as we will, and look at it from any side whatsoever, and it presents the appearance of anti-competitive behavior. PayPal’s deception and corruption in building its crypto business infrastructure now acts as a cartel sponsored by regulators.
PayPal forbids user access to their own private keys. What’s more, users will not be able to transfer their crypto holdings out of their PayPal account, nor will they be able to send crypto to other PayPal users.
In other words, PayPal more or less dictates what users can do with their cryptocurrencies, and could presumably freeze accounts if they see fit.
Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.
Note, however, that this potential monopoly could arise not from corruption but simply from a revenue-maximizing government that does not factor in the social benefits of competition or of effective natural monopoly regulation. Second, the hope of corrupt gains might lead government officials to privatize the wrong firms. That is, regulators may grant license(s) to firms that are operating at a high level as state firms and so appear valuable to private markets.
The cute part of the "long story short" business about PayPal's Conditional Bitlicense COVID-19 Earnings Manipulation Scheme and interlocking board directorates point to Libra renaming to Diem, then just three months later PayPal winning a New York Cond. BitLicense.
COVID-19 fraud is illegal and this should be prosecuted, or publically deferred.