PayPal’s crypto ambitions fade to the background as company sets new course

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PayPal went all in on crypto in 2021, building a wallet and touting big plans for both its Venmo and core payments unit. But the company was conspicuously quiet about crypto on Tuesday—barely mentioning the technology during its second quarter earnings call.

The earnings announcement was largely upbeat on news of a $15 billion stock buyback program, and that activist investor Elliott Investment Management was now one of its biggest shareholders. Those developments, along with PayPal exceeding analyst expectations, saw the share price shoot up 14% in after hours trading.

This was a welcome turnaround for shareholders as the company, struggling to maintain the momentum it enjoyed during the pandemic, had lost 54% of its stock value since the start of the year.

PayPal’s Tuesday earnings also included the appointment of a new chief financial officer, but crypto was relegated to the background. In a news release, the company did note it has launched crypto transfers between PayPal and other wallets and exchanges and added no-fee send and receive to family and friends on PayPal in the U.S. 

Crypto has been hammered so far in 2022 with the most popular cryptocurrency, Bitcoin, down about 50% since the start of the year and the second-most popular crypto, Ether, down about 55%. Although both cryptocurrencies have gotten a boost since the Federal Reserve raised interest rates by three quarters of a percentage point last week, the two most popular cryptocurrencies are down about 66% from their highs last November. 

Instead of expounding on the company’s crypto strategy, Schulman merely said on the earnings call that “digital wallets are the future,” adding that the company is doubling down in this area of the business, which was first introduced in 2021.

“We’re seeing some, really, quite a bit of adoption, quite a bit of churn reduction for those who come in. So we’ll continue to invest there,” he said.

Despite the lack of mention, a spokesperson for PayPal said that the company’s stance on crypto hasn’t changed.

“Crypto continues to be a strategic priority for PayPal and was mentioned in the Strategic Initiatives & Business Updates section of our release as such,” the spokesperson told Fortune in an email.

Shifting Priorities

The emphasis on digital wallets is one of three things that have taken priority as PayPal has cut back in some areas like marketing and headcount and narrowed its focus—as Schulman emphasized on the earnings call. Besides digital wallets, Schulman also highlighted two other areas of the business as priorities: checkout, the core of PayPal’s business, and Braintree which enables merchants to customize their shopping carts and integrate them with their own platforms.

Schulman also said the company was pulling back in other areas, including a plan to offer stock trading on its platform that CNBC reported the company was exploring last year. The company created a division called Invest at PayPal last year to spearhead the effort, according to CNBC, but on Tuesday, Schulman said the company has changed its focus.

“We were going to focus on Invest this year, like stock trading, that kind of thing. We’re not going to do that,” Schulman said. “We have reallocated those headcount into checkout, we’ve also been able to reduce headcount. We don’t have the same regulatory footprint that we thought we might have.”

Although PayPal has reaffirmed its commitment to crypto for now, it’s unclear whether the company’s shifting priorities and pressure from the activist investor, Elliott, will change things for crypto in the future.

PayPal reported second quarter revenue of $6.8 billion on Tuesday, slightly more than the $6.78 billion analysts expected, according to Factset. It also came in at $0.93 per share, exceeding the $0.87 that analysts expected. As of Wednesday, PayPal stock was up about 9.7% at $98.40.