On Wednesday (October 21), payments firm PayPal Holdings, Inc. announced a major move into crypto.
According to PayPal’s press release, “the migration toward digital payments and digital representations of value continues to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers.”
PayPal’s new service, which was launched today, will allow its customers to “buy, hold and sell cryptocurrency directly from their PayPal account.” Furthermore, PayPal plans to “significantly increase cryptocurrency’s utility by making it available as a funding source for purchases at its 26 million merchants worldwide.”
Dan Schulman, President and CEO, PayPal, had this to say:
“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.”
Initially, the supported cryptoassets will be Bitcoin, Ethereum, Bitcoin Cash, and Litecoin — users will be able to buy, sell, and hold these cryptocurrencies “directly within the PayPal digital wallet” — and the only supported jurisdiction will be the U.S. (this will happen “in the coming weeks”). PayPal is planning to “expand the features to Venmo and select international markets in the first half of 2021.”
Paxos Trust Company is helping PayPal with dealing with crypto in the U.S. To be able to do so, it had to be approved for the first ever “conditional Bitlicense” from the New York State Department of Financial Services (NYDFS).
Linda A. Lacewell, superintendent of NYDFS, stated:
“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.”
PayPal says that there are “no service fees when buying or selling cryptocurrency through December 31, 2020, and there are no fees for holding cryptocurrency in a PayPal account.”
PayPal is also providing its users with “educational content to help them understand the cryptocurrency ecosystem, the risks and opportunities related to investing in cryptocurrency, and information on blockchain technology.”
To increase the adoption of cryptocurrency in digital commerce, from early 2021, PayPal will allow its customers to “use their cryptocurrency holdings as a funding source to pay at PayPal’s 26 million merchants around the globe.” This will be handled in a similar manner to how currently it is possible to pay for certain goods/services with crypto (settled into fiat currency by a crypto payment processor such as BitPay).
PayPal consumers will be able to “instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees,” and PayPal merchants will “have no additional integrations or fees, as all transactions will be settled with fiat currency at their current PayPal rates.”
This seems like the biggest news the crypto space has seen this year because PayPal is a mainstream company and this move by PayPal is bound to increase the public’s awareness/adoption of crypto. One person that appears to agree with this view is Michael Novogratz, a former Goldman Sachs partner, as well as Founder, Chairman, and CEO of crypto-focused merchant bank Galaxy Digital: