Online payments giant, PayPal, is the latest company to join the list of mainstream Bitcoin adopters in recent months. As part of their new crypto-service, Paypal will allow customers to buy, hold and sell cryptocurrency directly from their accounts. The initiative will begin early 2021 and will allow users to use Bitcoin, Bitcoin Cash, Ethereum and Litecoin as a funding source for PayPal’s 26 million merchant accounts. The announcement will allow PayPal’s 346 million active accounts to directly interact with cryptocurrencies with virtually zero barriers to entry. By comparison, existing bitcoin owners are estimated to be within the vicinity of 20-25 million users worldwide. For many millions around the world this will be their first contact point to cryptocurrency, broadening the crypto-sphere to encompass an ever-growing user-base. This will be without a doubt the biggest advancement in merchant adoption of cryptocurrency, as the existing payment network bypasses the arduous user experience faults in the current cryptosphere.
For early adopters, having cryptocurrency as a funding source inside the PayPal digital wallet will only add value and enhanced utility for current crypto holders. PayPal has one of the largest merchant networks in the world and users will now be able to convert crypto to fiat currency with a guarantee of value and without service fees. Merchants will also be saved of conversion fees as transactions will be settled using fiat. Strict regulatory constraints mean that PayPal is restricting users to purchasing cryptocurrency on its own platforms without the possibility of transferring funds from existing wallets over to PayPal’s. But this is an excellent first step towards the adoption of permissionless money for payments giant.
PayPal has been issued a cryptocurrency license from the New York State Department of Financial Services. The superintendent of the NYDFS expressed that the ‘Bitlicense’ will provide a framework to interested institutions in order to adequately regulate the New York virtual currency marketplace. Such regulation is a pre-condition to cryptocurrencies mainstream adoption and will ultimately encourage and promote firms to adopt digital currencies. PayPal is effectively laying the groundwork for regulatory bodies and central banks around the world to develop a network for digital currencies. While these developments are already underway, today’s announcement will undoubtedly act as a catalyst for further progress, echoing Schulman’s comments that, “we are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role".
It certainly feels as though the Rubicon has been crossed as Paypal’s announcement has opened the doors for widespread adoption. Just as they always scrambled to keep up with the tech company in the early 2000s, we are confident that banks will follow now that Paypal has made the first step. Be on the lookout for further high-profile announcements in the new future.
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