PayPal has announced the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account, and signaled its plans to increase cryptocurrency’s utility by making it available as a funding source for purchases at its 26 mn merchants worldwide.
Mainstream adoption of cryptocurrencies has traditionally been hindered by their limited utility as an instrument of exchange due to its volatility, cost and speed to transact. However, the promise of advanced technological platforms offers the possibility of mainstreaming digital currencies. A survey conducted by the Bank for International Settlements revealed that one in 10 central banks (representing approx. one-fifth of the world’s population) expect to issue their own digital currencies within the next 3 years.
The industry is experiencing a rapid shift towards digital payments and digital representations of value, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers. To strengthen understanding and adoption of cryptocurrency, PayPal is introducing the ability to buy, hold and sell select cryptocurrencies, initially featuring Bitcoin, Ethereum, Bitcoin Cash and Litecoin, directly within the PayPal digital wallet. The firm will also provide accountholders with educational content to help them understand the cryptocurrency ecosystem, the risks & opportunities related to investing in cryptocurrency, and information on blockchain technology.
“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. Our global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange. 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,” said Dan Schulman, president and CEO, PayPal.
PayPal also has plans to expand the features to Venmo and select international markets in the first half of 2021. The service is enabled in the U.S. through a partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services. The firm has also been granted conditional Bitlicense by the New York State Department of Financial Services (NYDFS).
“NYDFS’ approval today follows our June 2020 announcement for a new framework for a conditional Bitlicense to encourage, promote, and assist interested institutions to have a well-regulated way to access the New York virtual currency marketplace in a way that is both timely and protective of New York consumers, through partnerships with New York authorized virtual currency firms. NYDFS will continue to encourage and support financial service providers to operate, grow, remain and expand in New York and work with innovators to enable them to germinate and test their ideas, for a dynamic and forward looking financial services sector, especially as we work to build New York back better in the midst of this pandemic,” said Linda A. Lacewell, superintendent, NYDFS.
The service will be available to PayPal account holders in the U.S. in the coming weeks. The company charges no service fees when buying or selling cryptocurrency through December 31, 2020, and there are no fees for holding cryptocurrency in a PayPal account. The firm is exploring the potential of digital currencies through partnerships with licensed and regulated cryptocurrency platforms and with central banks around the world and will also continue to explore the potential of distributed ledger technologies to improve financial services and assure they are faster, more secure and less expensive. PayPal intends to work hand-in-hand with regulators, governments and central banks in this quest.
Established since 1998, PayPal is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders. The company has remained at the forefront of the digital payment revolution for more than 20 years.