Paypal is entering the cryptocurrency space: the firm has announced it will allow account holders in the U.S. to buy, sell, and hold bitcoin in their PayPal wallets over the coming weeks.
The payments giant will also enable users to spend bitcoin through its network of 26 million merchants in early 2021. The news follows official approval by the New York State Department of Financial Services (NYDFS).
According to PayPal president and chief executive Dan Schulman, the rationale behind today's move is two-fold: to encourage the global use of cryptocurrencies, and to prep the PayPal network for any future central bank digital currencies (CBDC).
"The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly," Schulman said in a PayPal press release.
"We are eager to work with central banks and regulators around the world to offer our support, and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce," he added.
Bitcoin isn't the only cryptocurrency on offer. PayPal's roster will initially feature Bitcoin, Litecoin, Ethereum, and Bitcoin Cash, with Paypal planning to extend the same support to its payment subsidiary Venmo and select international markets early next year.
Per the PayPal release, all crypto payments will be settled using fiat currencies, meaning merchants will receive fiat rather than bitcoin.
"PayPal merchants will have no additional integrations or fees, as all transactions will be settled with fiat currency at their current PayPal rates," explains the payments firm. "In effect, cryptocurrency simply becomes another funding source inside the PayPal digital wallet, adding enhanced utility to cryptocurrency holders, while addressing previous concerns surrounding volatility, cost and speed of cryptocurrency-based transactions."
Crypto integration in the U.S. is made possible thanks to PayPal's partnership with Paxos Crypto Brokerage.
“Paxos is pleased to partner with PayPal to support their entry into the cryptocurrency marketplace,” said Paxos CEO Charles Cascarilla in a company press release. “We were the first company to receive a New York Trust Charter for virtual currency business activity so it is fitting that we are also the first to support the Department’s new conditional licensing framework. PayPal’s selection of Paxos is a reflection of New York’s status as the gold standard for cryptocurrency regulation.”
With over 346 million active users and 26 million merchants within PayPal's vast network, it's fair to say that Bitcoin adoption is likely about to get a significant leg up.