PayPal marks its entry into the crypto space with new services

• PayPal will now allow its customers to buy, hold, and sell cryptocurrencies, as well as use crypto balances to make payments through its global trading partners.
• PayPal’s move into the space could popularize and accelerate the acceptance of crypto payments.
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US PayPal account holders will soon be able to buy, hold, or sell cryptocurrencies from PayPal’s digital wallet, as well as fund purchases on PayPal’s global trading network using crypto balances. PayPal will convert crypto balances and settle transactions in fiat currency for consumers and merchants with no additional fees.

For consumers, buying and selling cryptocurrencies will incur fees based on PayPal’s fee structure. PayPal plans to roll out the offering in select international markets and will expand the cryptocurrency features on Venmo in the first half of 2021. The new service, enabled by PayPal’s conditional Bitlicense from the New York State Department of Financial Services, will launch in partnership with Paxos, which will allow trading and back-end custody.

PayPal’s move into the space could popularize and accelerate the acceptance of crypto payments. Market volatility, the cost and time of transactions, and their limited usefulness for transactions have prevented the widespread adoption of cryptocurrencies as a payment method and hampered acceptance by merchants in recent years. But with more players like Chimpion, Coinbase, and Flexa facilitating crypto transactions, acceptance has started to grow. PayPal has 26 million merchants worldwide, so the feature could help dramatically increase the acceptance rate by allowing these transactions to a much broader set of players.

The PayPal system is comprehensive and exceptionally robust; We believe it could benefit the company in three ways:

• PayPal can be positioned to capitalize on central banks’ interest in cryptocurrencies. Global central banks have expressed interest in implementing digital fiat currencies, which are similar to cryptocurrencies in some respects: central banks in the UK, Japan and other markets have already partnered with the Bank for International Settlements (BIS) to assess cases. of use of this type of currencies. And one in 10 central banks expects to introduce their own form of these currencies in the next three years, according to a BIS survey. The introduction of a cryptocurrency service could allow PayPal to prepare for this future and could help position it as a leading player in the space.
• You can help PayPal attract new users. Square’s Cash app attracted customers with its crypto offering, which was first introduced in 2018. PayPal’s offering can attract customers who want to buy and sell crypto, helping you reflect Square’s success in the space and to attract customers interested in cryptocurrencies who might otherwise have gone to another player. Additionally, because the offer will allow for encryption acceptance for its global business network, it could be a useful payment method for customers on the go, helping PayPal further grow its user base.
• The new offering could represent a lucrative income opportunity. If the buy and sell portion of PayPal’s offering takes off, you can charge a lot with its fee structure – a revenue factor for Square as well, which is noticeably more expensive compared to other platforms, like Coinbase. However, customers can look beyond the fee structure due to PayPal’s robust feature set.

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