PayPal has launched a new service enabling its customers to buy, hold and sell cryptocurrency direct from their PayPal account.
The company cited the Covid-19 pandemic as driving migration towards digital payments, as well as the increased interest in digital currencies from central banks and consumers, as behind the move.
Cryptocurrencies on the initial list include Bitcoin, Ethereum, Bitcoin Cash and Litecoin, with plans to expand to Venmo and ‘select international markets’ in the first half of 2021. The company has also been granted a conditional Bitlicense by the New York State Department of Financial Services (NYDFS).
There is an important distinction to make here, as the company notes:
“PayPal customers will be able to use their cryptocurrency holdings as a funding source to pay at PayPal’s 26 million merchants around the globe. Consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees.
“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.”
Ultimately, cryptocurrency payments processed by PayPal will be settled in fiat currencies. What’s more, there is little to no interoperability at the moment. Three questions on a PayPal cryptocurrency FAQ page – which is not readily advertised in its press materials – give more information on the options available:
Can I use Cryptocurrencies to pay or send money with PayPal?
At this time, you cannot use Crypto as a way to pay or send money on PayPal.
Can I use my Cryptocurrency balance as a funding source for my purchases?
No, not at this time.
Can I transfer Cryptocurrency into and out of PayPal?
Currently, you can only hold the Cryptocurrency that you buy on PayPal in your account. Additionally, the Cryptocurrency in your account cannot be transferred to other accounts on or off PayPal.
In spite of the caveats however, this certainly makes for an interesting development, particularly given PayPal was one of the payment vendors who dropped out of the Libra project last year. Libra itself, in April, made a strategic change to tie more into local currencies, citing regulatory hurdles. The service as it stands can be seen as similar to Robinhood right now, as industry analysts have noted.
“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,” said Dan Schulman, president and CEO of PayPal in a statement.
“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,” Schulman added.
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