PayPal Claims $2500 ‘Misinformation Fine’ In Error

Check out the biggest breaking crypto market updates for today:

Two Main Factors Reversed A Crypto Market Rally Last Week

Last week, the crypto market looked like it was ready to rally, until two significant macro factors intervened to rain on everyone’s parade. 

The first factor was OPEC’s decision to cut oil production by 2 million barrels per day. This restriction of supply is likely to increase inflation around the world. Which in turn will force central banks – namely, the Federal Reserve – to continue raising interest rates aggressively to try and fight inflation.

The continued raising of interest rates will cause assets to continue to crash, as money is sucked out of assets and into cash. Lots of liquidity is also moving into government debt, given that it is offering higher interest rates thanks to the central banks. 

The second macro factor that moved the crypto markets was the publishing of the September unemployment statistics for the United States. 

While unemployment was expected to rise due to poor economic conditions, it unexpectedly fell – suggesting that the United States economy is in better shape than previously thought. 

In theory this would be a good thing, but in practice it’s not. 

This is because the Fed’s two jobs are to ensure a 2% inflation rate and a 4% unemployment rate. And with an unexpected 3.5% unemployment rate for September, this gives the Fed the wiggle room it needs to continue raising interest rates. 

Because investors are always trying to price in what will happen over the next 6-12 months, both the crypto market and the stock market crashed when the positive unemployment figures were released. 

That’s the financial system for you. Good news can be paradoxically bad for assets. 

The only crypto-specific factor that seems to be weighing on the crypto market these days is regulations: 

The International Monetary Fund is set to draft regulatory recommendations for cryptocurrency that it expects all countries to abide by this week. 

Thus, these “recommendations” tend not to be recommendations at all – but more instructions that countries must follow “or else”. 

We’ll be sure to cover them when they’re released.

PayPal Says New Policy to Charge Users $2500 For ‘Misinformation’ Was ‘In Error’

Centralized online payment network PayPal has retracted a controversial policy update that said it would fine users $2,500 for spreading “misinformation.” 

The payment network received major backlash as people around the world canceled their accounts after hearing about their eerie policy update. Over the weekend, PayPal retreated on the policy, claiming that the update to their terms was published “in error”: 

“PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy […] Our teams are working to correct our policy pages. We’re sorry for the confusion this has caused.” 

Despite the retraction, the crypto community took the opportunity to reiterate the need for self-custody and decentralization. Maple Finance co-founder Sid Powell stated: 

“PayPal is a good example of why you need to custody your own funds. Your finances used to be decoupled from free speech. Now custodying your own funds is the only way to safeguard that right for yourself.” 

The now-retracted misinformation clause in PayPal’s Acceptable User Policy (AUP) was set to take effect on Nov. 3, which would have expanded its list of prohibited activities to include “the sending, posting, or publication of any messages, content, or materials” that “promotes misinformation.” 

The controversy has spread like a virus on Twitter among both crypto and non-crypto observers, with some continuing to comment on the issue even after the retraction. 

David Marcus, CEO of Lightspark and former president of PayPal, called it “insanity” that “a private company now gets to decide to take your money if you say something they disagree with.” 

Elon Musk, CEO of Tesla and former co-founder of PayPal, responded to Marcus’ tweet with “Agreed.” 

Michaël van de Poppe, founder and CEO of crypto consulting and education platform Eight, kept his opinion short and sweet, calling it “The end of PayPal.” and following it up with “Buy Bitcoin.” 

While the implementation of a fine would’ve been a first for PayPal, the payment giant is no stranger to deplatforming users it isn’t politically aligned with, having cut ties with domain registrar Epik in the past, which provided services to The Proud Boys and other groups considered by some to be far-right, in October 2020. 

Similarly to the broader stock market, PayPal shares have plummeted 64.65% over the last 12 months, according to Yahoo Finance. 

Since the controversy, PayPal has told multiple outlets reporting on the clause that the updated Acceptable Use Policy concerning misinformation went out in error. 

Guess their fingers must have slipped on the keyboard when they typed that one out in plain English into their policy. And the teams of lawyers who reviewed it before it was released must have overlooked it, too. Oops!

Some in the crypto community believe this was actually a “test” of the policy the government wants to operate CBDCs under with a social credit score.

DeFi Startup Arch Raises $5 Million To Become ‘The Blackrock Of Web3’

DeFi startup Arch, a company that aims to become the “BlackRock of Web3”, has reportedly raised $5 million dollars in a seed round that was led by Digital Currency Group and SoftBank spinoff Upload Ventures. 

The round also saw participation from other investors such as the venture arm of Latin America blockchain firm Ripio, TechStars and GBV. 

The funds raised from the round will reportedly be used to tokenize a wider suite of DeFi indices and to develop the platform into a decentralized asset management protocol. 

“We kept hearing stories of people who, for instance, wante3d to get into crypto, and the only option they really had was going out to exchange and buy this single token that a friend had recommended to them that they really didn’t know anything about,” said Christopher Storaker, co-founder and CEO of Arch, in an interview with The Block. “They were basically putting all their eggs in one basket.” 

Storaker says diversification is the only free lunch in finance and wants to make it simple for the web3 ecosystem. His decentralized asset management protocol creates well-diversified tokenized investment portfolios that individuals will be able to buy via a smart contract and then self-custody, he said. 

By doing this, the company aims to go head-to-head with the likes of BlackRock. 

But why should an investor use Arch instead of buying a crypto exchange-traded product from a big player like BlackRock or 21Shares? Especially as BlackRock increasingly moves into crypto? 

Storaker says Arch will take a different approach by going beyond just Bitcoin and Ethereum to provide investors exposure to the cutting edger of what’s happening in Web3. 

“When we say ‘BlackRock of web3,’ we really want to be on par on the methodology side with what they do and what people expect from passive products,” Storaker said. 

The team also wants to ensure that the transition of capital from web2 to web3 is as seamless as possible for newcomers to the space. 

“It’s not something that comes naturally,” he added. “But I think people are willing to try it.” 

This is why Ripio Ventures, the venture arm of Latin America-based blockchain firm Ripio, decided to back the team. They said Arch has the potential to touch millions of users in Latin America and offers potential collaboration opportunities for Ripio. 

Ripio currently has about 3.5 million users, mainly in Argentina and Brazil, a Ripio spokesperson said. 

“What Arch offers is a solution that is interesting because it’s bringing in something that is complex … [and] making it easy for everyone to do it,” said Andres Fleischer, managing partner of Ripio Ventures. 

Arch is currently built on Ethereum rails. Primarily because it’s an order of magnitude greater than any other ecosystem, Storaker said. 

Tokens = Securities? 

Offering tokenized products to the average investor does, however, create challenges. 

SEC Chairman Gary Gensler has repeatedly reiterated that he believes “most crypto tokens are securities” and that many intermediaries need to register with the SEC, “whether they call themselves centralized or decentralized.” 

“We have been working with counsel almost from day one, in making sure that we don’t run afoul of regulation here in the U.S. and elsewhere,” Storaker said. “For us that means sometimes going slower than you might have done otherwise, buyt so you don’t mess up.” 

The platform will offer two index-tokens: the Arch blockchain token, which tracks the world’s largest blockchains, and the Arch Ethereum Web3 token, which tracks native tokens of major protocols like Chainlink and Uniswap. 

Arch previously raised a pre-seed round and went through the TechStars accelerator program. 

The new funds from the round will be used to tokenize a wider suite of decentralized finance indices and to develop the platform into a decentralized asset management protocol.

Luke Baldwin

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