Stripe's Ambition in Cryptocurrency Payments Behind $53.4 Billion PayPal Acquisition Proposal

PayPal in front, Tempo behind?

Written by: William M. Peaster

Compiled by: Saoirse, Foresight News

According to reports, payment giant Stripe is teaming up with private equity firm Advent International to launch a buyout offer, pricing at $60.5 per share, with a total transaction size of $53.4 billion. The PayPal board is expected to meet this week to review the acquisition proposal.

Currently, nothing is finalized, and whether this acquisition will go through remains uncertain. If the board does not outright reject the offer, it is likely to request a higher bid.

However, if the deal is successfully completed, it will become the largest fintech acquisition in history, and the cryptocurrency industry layout behind this transaction is worth exploring.

Looking back at recent years, it is not hard to see that Stripe has been quietly building a complete ecosystem for stablecoins: spending about $1.1 billion to acquire the stablecoin issuance platform Bridge; acquiring leading embedded wallet service provider Privy; collaborating with Paradigm to incubate a Layer 1 blockchain focused on payment scenarios called Tempo; and recently joining forces with over a hundred companies to support the new alliance stablecoin Open USD (OUSD). This stablecoin is uniquely designed to distribute the income generated from reserve assets to channel distributors rather than the token issuer.

This infrastructure layout is missing one crucial element: end users. For a long time, Stripe has only operated in the B2B space, providing underlying payment infrastructure for merchants and developers, without products aimed at ordinary consumers, nor does it control traffic from the general public.

In contrast, PayPal holds hundreds of millions of active accounts, has the widely-used payment app Venmo, and launched its own compliant stablecoin PYUSD in 2023.

Currently, all acquisition-related news comes from Reuters citing anonymous industry insiders, and Stripe has not publicly disclosed the core motivations behind this acquisition. However, one cannot help but wonder: is acquiring PayPal a way to secure a mass distribution channel for its stablecoin infrastructure, which could be one of the core motivations for this acquisition?

Currently, stablecoins have become the flagship application in the cryptocurrency industry, sparking an arms race for infrastructure. Projects like Tempo, Circle's Arc, and Plasma have all entered the fray. Previously, it was assumed that whoever had stronger underlying payment channels would capture the market. However, Stripe's acquisition move conveys a distinctly different industry judgment: the construction of underlying payment channels has become largely complete, and the main battleground for industry competition has shifted to user-facing traffic entry points.

Let us envision the business loop that could form after the acquisition is completed: Stripe connects with merchants, PayPal and Venmo reach vast numbers of consumers, and with the addition of a stablecoin settlement layer, a complete flow of funds is established. Funds can flow directly from user wallets to merchants, bypassing card settlement networks like Visa and Mastercard, saving on high fees, while the existence of stablecoins would further lower overall settlement costs, achieving vertical integration across the entire industry chain.

However, this merger still faces many unresolved questions: Will the currently $2.8 billion market cap PYUSD, issued by Paxos, migrate to the Tempo blockchain in the future? Once OUSD is officially launched, will PYUSD be integrated into that alliance stablecoin system? Will Venmo become a public wallet exclusive to the Tempo blockchain?

Looking at PYUSD itself, its size is less than one-twentieth of Circle's USDC, making it less attractive. The real value of this acquisition lies in the massive user accounts holding cryptocurrency assets within the PayPal app—large user base, broad market coverage, and deep brand recognition are the core values.

Moreover, even if the acquisition goes through, it may not necessarily lead to explosive growth for Tempo. Advent International will hold an equal proportion of shares, and the core operation of private equity firms is to maximize cash flow returns. The restructured PayPal will likely impose strict cost controls, and on-chain cryptocurrency-related businesses may be deprioritized.

Another intriguing detail about this acquisition is that Block, the company founded by Jack Dorsey (the parent company of Cash App and a direct competitor of Venmo), is also participating in the $17 billion equity funding portion of this acquisition. Currently, it is impossible to determine what benefits Block might gain from this involvement, and future developments remain to be seen.

It is worth mentioning that as this acquisition offer comes to light, the industry is undergoing multiple changes: Robinhood's public blockchain is rapidly rising, aggressively expanding into the retail user market; Coinbase's Base blockchain continues to ramp up global financial operations; and the Solana ecosystem is gaining momentum. If Stripe successfully acquires PayPal, it will not only have a profound impact on the traditional financial industry, but if Venmo becomes the front-end entry point for Tempo, Tempo's competitive advantage in the public blockchain space will significantly increase, pushing this payment blockchain into the mainstream public view.

This is the most critical clue worth paying attention to in the entire industry right now, and the development of this matter has a dramatic narrative. PayPal once aimed to create a native internet currency but ultimately became an intermediary in the traditional card payment system. Now, with Stripe throwing out a $53.4 billion acquisition offer, it is, in a sense, trying to leverage the cryptocurrency stablecoin payment system to fulfill the vision that PayPal failed to achieve back in the day.

Of course, this acquisition could completely fall through next week; it could also be approved after a price increase. But regardless of the final outcome, this acquisition offer alone is enough to glimpse Stripe's long-term layout, which will greatly change the future development prospects of the Tempo payment blockchain.

So, front-end relying on PayPal, back-end relying on Tempo? The answer can only be given by time. Regardless of the success or failure of the acquisition, it is evident from Stripe's continuous layout actions that its stablecoin business empire has just begun.

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