Paxos Trust Versus Gemini Trust

The payments app PayPal is now allowing its customers to purchase cryptocurrency. That doesn’t mean that PayPal’s selling cryptocurrency or storing it itself though. Like other money transfer apps, PayPal is connecting to a partner’s API. So I looked it up and PayPal’s partner is Paxos Trust. Meanwhile, several other fintechs are using Gemini to support their cryptocurrency services. So I decided to compare Paxos with Gemini.

Both Brokers Offer White Label Services

When a company like PayPal announces support for cryptocurrency, the news articles feature PayPal. Reporters will say that you can buy cryptocurrency with the PayPal app. Technically, this feature is available to any business with a payment app that connects to the crypto broker’s API. For example, if the Starbucks payment app was connected to either brokerage, then reporters could say that the coffee shop lets you buy cryptocurrency.

It takes more background knowledge to understand that what’s really happening is that the payments app is connected to the crypto brokerage’s API. PayPal isn’t a crypto brokerage. If you use it to buy coins, Paxos will store the coins for you as PayPal’s partner. And that also means that the features of PayPal’s cryptocurrency app are limited to the features Paxos provides.

Neither brokerage comes out ahead on this metric. If another financial service provider signs a deal with either of these companies, that company will get the credit for offering cryptocurrency trading.

Gemini Supports More Coins

Paxos currently supports Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. These cryptocurrencies are also available on the PayPal app. The other coins Paxos offers, including the Paxos stablecoin and the Paxos gold-backed coin, aren’t available on the PayPal app. So this app only supports four coins but they’re the most widely used ones.

Like I said in my last article, Gemini supports 33 different cryptocurrencies. So payment apps, fintechs, and neobanks that use this brokerage can also offer storage and trading for any of those coins. Gemini is the clear winner on this metric.

Both Companies Are Trustworthy and Secure

Paxos Trust and Gemini Trust are located in New York City and are regulated by state laws. These crypto brokerages are regularly audited and their assets are stored in US banks. These brokerages also follow all of the relevant KYC (know your customer) and AML (anti-money laundering) laws for the US banking industry.

That means that the IRS will be aware of your crypto holdings and trades at these brokerages. You won’t be able to purchase cryptocurrency anonymously through these brokerages or the fintech apps that connect to them. But both startups are reputable financial institutions. Neither brokerage comes out ahead on this metric.

Investment Banks Use Paxos

Both companies serve as cryptocurrency brokerages for major financial institutions. Paxos doesn’t just support the PayPal app. In 2020 the neobank Revolut added crypto trading through a partnership with Paxos. So Revolut supports the same four cryptocurrencies that Paypal does. The banks Societe Generale and Credit Suisse also have partnerships with Paxos, and so does the securities broker Instinet.

Gemini’s major partners include the mobile phone manufacturer Samsung and the asset manager State Street. So you can set up a cryptocurrency wallet on a Samsung smartphone. And banks and wealth advisors can add cryptocurrency to their customers’ investment accounts and have State Street handle the transaction reporting while Gemini stores the cryptocurrency. Gemini also has partnerships with several other fintech startups such as the payments app Flexa and the stock trading app TradingView. It’s harder to pick the winner in this round, but I’d say Paxos comes out ahead here.

Paxos Charges Lower Fees

Gemini and Paxos both charge fees on cryptocurrency trades to their customers, the financial institutions whose apps connect to these brokerages. These apps then pass on the cryptocurrency brokerage fees and charge additional fees on top of that.

As a result, just knowing the fees that these crypto brokerages charge their customers isn’t enough information to know how much a trade will cost on an app like PayPal, because PayPal will add its own fees. And it’s the same situation if you’re buying cryptocurrency through a Samsung app, a State Street brokerage account, or another financial service. But Paxos has a fee schedule here and Gemini has a fee schedule here. And Paxos wins this comparison because it has lower fees.

Conclusion

Paxos has lower fees and more impressive clients, at least in my opinion. Gemini offers a wider selection of cryptocurrencies. Both brokerages, or trusts, offer white-label services and are highly secure and well-regulated institutions. So Paxos is the winner in this comparison, but the results were very close and these companies are fairly evenly matched.

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