Saying the “shift to digital forms of currencies is inevitable,” PayPal president and CEO Dan Schulman announced that customers would be able to buy, sell, and hold bitcoin and three other cryptocurrencies in their accounts.
The Oct. 21 announcement focused on U.S. accounts, which will gain access “in the coming weeks.” But, it added, the service will be expanding to Venmo and some other countries by the first half of 2021.
Along with bitcoin, PayPal’s service will allow users to hold and use ether, bitcoin cash, and litecoin directly from within their PayPal account wallets. Paxos Trust Company won the coveted status as PayPal’s cryptocurrency processing partner.
Digital currencies bring “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,” said Schulman.
The payments firm also said it expected to make it far easier to spend cryptocurrencies by “making it available as a funding source for purchases at its 26 million merchants worldwide.”
Crypto balances will be instantly converted to fiat currency for purchases, with no incremental fees based on the size of the conversion.
“PayPal merchants will have no additional integrations or fees, as all transactions will be settled with fiat currency at their current PayPal rates,” the company explained. “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.”
PayPay founder and chairman Jack Dorsey has been a longtime supporter of bitcoin, with his Square payments firm beating PayPal to the punch by launching bitcoin support in May. It also invested $50 million in bitcoin this month.
PayPal, which banned cryptocurrency exchanges beginning in 2017, also announced that it had been granted the first-ever “conditional” Bitlicense by the state of New York, considered the gold standard in U.S. regulation of cryptocurrency exchanges.
PayPal will offer educational resources about the use and risks of cryptocurrencies, and about blockchain generally, the announcement said.
Taking crypto global
With 325 million customers in 200 markets worldwide, PayPal made clear that it sees itself as playing a leading role in what it called the coming “mainstreaming” of bitcoin and other digital currencies as part of the world’s financial system in the coming years.
“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,” Schulman said. “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.”
PayPal also cited a Bank for International Settlements survey that predicted one in 10 central banks will issue their own digital currency in the next three years.
The announcement came the same day that The Bahamas launched the first-ever central bank digital currency, or CBDC, known as the Sand Dollar.
China is likely to be the first major economy to do so, with the digital yuan renminbi speeding towards its launch, most recently with a lottery in Shenzhen that saw 50 million consumers given about $30 in digital yuan renminbi, with 95% spending it at some 4,000 merchants within the required week.