PayPal brings crypto further into mainstream with wallet update
PayPal has told its US customers that they will be able to buy, sell and hold a selection of cryptocurrencies via its digital wallet “in the coming weeks”.
Come early 2021, the move will also see users able to spend cryptocurrency via their PayPal wallet at all 26 million merchants in the payment giant’s network.
In the next year, the digital wallet provider also plans to expand this offering to its social payments service, Venmo, as well as reach customers beyond the US.
A move closer to CBDCs
Around the world, PayPal has roughly 346 million customers, according to Statista. In the US, PayPal accounts for around 14% of online payments, according to PaymentsJournal.
PayPal’s chief executive Dan Schulman tells Reuters two reasons for the major feature update.
One is to encourage global use of virtual coins. And two is to prepare PayPal’s network for what Schulman views as the inevitable emergence of central bank digital currencies (CBDCs).
PayPal confirmed to Reuters that it is currently working with central banks to understand how it can feature in the development chain of CBDCs.
The feature update follows PayPal’s departure from Facebook’s crypto project Libra roughly a year ago.
The founding member jumped ship just a few months after it launched, causing a series of other major founding members to abandon the project.
But now PayPal has landed the first conditional cryptocurrency licence from the New York State Department of Financial Services.
This licence will allow US users to purchase bitcoin, ethereum, bitcoin cash, and litecoin via the PayPal wallet. The payments giant has partnered with Paxos Trust Company to deliver the new service.
A big step for crypto adoption
As well as a huge customer base, PayPal also processed $222 billion in payments in the second quarter of 2020.
Whilst smaller players offer users the ability to spend, save and deposit in crypto, PayPal is by far one of the largest players yet to offer this feature.
In 2018, it held 38% of UK payments, 38% in France, and 41% in Italy. It’s overtaken Visa and Mastercard in Germany, where it now represents at least 58% of payments. That’s according to PaymentsJournal data.
This year has been no different to the rest when it comes to the volatility of the world’s largest cryptocurrency, bitcoin.
Major crypto exchange Binance experienced a 47.4% spike in new institutional investors in the first quarter of 2020.
Then in mid-March, the price of bitcoin crashed from around $7,900 to under $5,000. Prices have since recovered, but the dip stands as testament to currency like bitcoin’s unpredictability.
It’s hard to quantify crypto adoption because of the private nature of cryptocurrencies. But research shows that digital currencies see a greater uptake in developing as opposed to developed markets.
According to a Statista study, 32% of Nigerians have used or owned cryptocurrencies in 2020, whilst in Japan, this figure sits at just 4%.
There’s still more to do
PayPal will settle cryptocurrency payments using fiat currencies like the US dollar. This means merchants won’t have to convert virtual currencies into physical ones.
But Danny Scott, CEO and co-founder of CoinCorner – a platform where UK and European consumers can buy bitcoin – thinks PayPal’s crypto functionality is still too limited.
“PayPal is currently only offering this service to the US and by the sounds of the functionality, it’s very basic. You can’t withdraw your bitcoin and use it elsewhere, or send your bitcoin from outside of PayPal into their system.”
But Scott also acknowledges that “it shows a positive step forward for the industry, and brings yet more credibility to bitcoin and its future”.