Published: November 17th, 2020
After weeks of preparation and about the same time in driving need, PayPal is now ready to allow the U.S. residents to buy and sell cryptocurrency on its platform. The online payment processing company announced just last month that it would introduce the functionality.
PayPal Holdings, Inc. has announced that its users in the U.S. can now buy, sell, and hold cryptocurrency using their accounts. The news is contained in an update to a press release that the company posted in October.
The statement first appeared on TechCrunch, where PayPal announced that it would add new functionality that allows users to buy and sell crypto. As of Friday, November 13, the functionality is now live on the platform.
The function, now available on the PayPal platform on the top of the homepage, allows users to buy Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
The announcement is an enormous boost towards the conventional adoption of cryptocurrencies as a standard payment mode. However, PayPal is not the first notable payment processing platform to show an overt liking for virtual currencies. In 2018, Square, Inc. became the first payment service provider to support crypto when it included and expanded support for Bitcoin in all the 50 U.S. states.
The motives of PayPal and Square to adopt crypto, however, seem different. When Square adopted digital coins, they announced that the earnings report informed it. In 2018, the company said its profit margin from the world's first crypto coin amounted to $420,000 in Q2 of that year alone.
PayPal has announced plans to expand the cryptocurrency functionality to its mobile money transfer subsidiary, Venmo. The online payment platform also wants to introduce the service to a few select markets in Q1 and Q2 of 2021. The company added that it would provide a feature that allows users to pay merchants using cryptocurrency before June 2021.
Adam Levy, a staffer with the Motley Fool, said that the arrangement is a big deal. Once the platform goes global, PayPal users would have access to over 26 million merchants, and they can conveniently use crypto in these outlets, Adam added.
However, the crypto enthusiast said it is PayPal's win and a step for the entire crypto space.
Giving users the ability to buy and sell cryptocurrencies on PayPal increases engagement on the platform and its services, added Adam. He said that the platform's goal and its CEO, Dan Schulman, is to make the online payment services provider a daily utility platform, and this step brings it closer.
The general financial industry endorsement of Bitcoin and cryptocurrencies is increasing several folds. Square, which is PayPal's most prominent competitor, has ramped up engagement with cryptocurrency by including additional features like Bitcoin trading into its Cash App.
Square said that it has noted over time that users who make the most of the platform features, such as crypto trading, also send money to their contacts. The said users spend on their Cash Card and use other crypto-cash related features on the network.
PayPal may have announced a Bitcoin buying and selling feature, but reliable sources say the company is lining up more features. Sources privy to the PayPal operation say that while the platform will facilitate transactions between users and merchants using crypto, behind the scenes, PayPal will liquidate and send the merchants the fiat equivalent of the crypto spent.
However, the same source said that users would have the opportunity to hold their crypto wealth until they need to spend it. The platform's management believes that such a seamless operation would bring more crypto holders to the PayPal fold.
In its press release, the company said that it is not looking to make money through commissions from trades. Instead, it will foster free exchange and earn from the transactions between users and merchants.
Making it possible for users to buy and sell virtual currencies and facilitate payments is the first step for claiming the crypto pie. While announcing the new feature, Schulman said that the shift to digital coins and other forms of virtual currencies is inevitable.
He said he wants his company to play an integral role in defining the role that virtual currencies will play in the future of global finance and commerce. Initially a crypto skeptic, PayPal has come around and is now among the most prominent FinTech companies publicly endorsing Bitcoin and cryptocurrencies.
The company's enthusiasm is evident from the pace with which it is introducing new products.
While making a call for its Q4 earnings, the company's CFO, John Rainey, said his company is willing to spend to foster its growth. He announced that the company had spent some $300 million in Q2, adding that PayPal's goal is to advance its key priorities and accelerate growth initiatives.
Already, the company is exploring options for acquiring cryptocurrency companies. According to Bloomberg, the online payment processor is reportedly interested in BitGo, a cryptocurrency custodian. The Palo Alto-headquartered company has since partnered with Paxos Trust, BitGo's competitor, to enforce a takeover.
Reports also indicate that PayPal might opt to develop its cryptocurrency. It was initially involved in such a venture when it backed the Facebook-initiated Project Libra. However, alongside many backers, the company dropped out when Facebook faced several regulatory problems that halted Libra's further development.
Unlike Facebook, a cryptocurrency makes more sense to the PayPal platform because it would reduce its dependence on payment partners and the traditional banking network. Besides, it can reduce the cost of operations while enhancing the speed of cross-border remissions.
The cryptocurrency trading function that PayPal announced last month that it would implement is now live. Platform users in the U.S. can now buy and sell Bitcoin and three other cryptocurrencies using the function. This feature is one among many that PayPal is implementing while jostling for a lead position in the digital money remissions sphere.