American Payment Companies Paralyzed By Regulatory Concerns, International Payment Companies Take Advantage Of The Window Of Opportunity

PayPal and Stripe, the American leaders in payment gateway technologies, are feeling the chill put out by regulators suddenly focused on the cryptocurrency industry. The impact of which may be irreparable harm to PayPal, Stripe, and the greater payment innovation ecosystem in the United States.

Maneuvers by the United States government pertaining to cryptocurrency exchanges have induced a state of inaction among all American firms that are involved in cryptocurrencies or are crypto-adjacent including payment gateway groups. There is rampant speculation about whether there is a path to crypto product-integration which has the approval of the United States government, and whether there’s a profitable business to be had within their future regulatory framework.

This uncertainty is reflected in price action by PYPL , down nearly 11% year-to-date with increasing concerns about management’s ability to navigate shrinking margins and innovate. PayPal and other major American payment gateways like Stripe had a lukewarm approach to cryptocurrency to begin with so in many ways, recent regulatory concerns only validate their concerns.

When PayPal entered cryptocurrency in late 2020, it did so with a heavily-restricted product which merely enabled users to buy, sell, and hold major cryptocurrencies. Although the company eventually allowed off-platform asset transfer in mid-2022, the offering was broadly discredited as superficial involvement in cryptocurrency without a genuine embrace of its ethos.

Similarly, payments powerhouse Stripe has maintained an ambivalent stance towards cryptocurrency. Co-founder Patrick Collison's remarked, "(Bitcoin) may or may not be important in five years," as the company axed cryptocurrency-related initiatives in 2018. Only recently has the company reintroduced fiat-to-crypto services. Yet, amidst the fresh Securities and Exchange Commission enforcement actions, the blockchain community remains dubious about Stripe's commitment to the sector.

The result of an already-tepid approach being hit with regulatory concerns ahead of what some project may be a difficult macroeconomic environment is a perfect storm which has brought American crypto innovation to a halt.

The United States government's regulatory inaction risks not only stifling innovation in the domestic industry but is also damaging to the global perception of American policy regarding financial innovation. The government's focus on classifying cryptocurrencies as securities is driving away companies that could have been leaders in the sector. Its current regulatory stance might not serve or protect the end-user, and could, in fact, damage companies like PayPal and Stripe.

These companies are at risk of being left behind by emerging global players like NOWPayments, which have seized the opportunity to provide a crypto payment gateway with mass compatibility and which opts out of potentially problematic practices including custody.

It is time for the United States government to realize the potential damage it is doing to its profile as an innovation-friendly nation and take bold steps to encourage responsible growth. Failure to do so risks the loss of American leadership in a vital sector, with significant long-term consequences for the economy and society as a whole.