Cryptocurrencies,  Technology

In major U-turn, PayPal may allow 325M users to buy crypto. Are exchanges under threat?

Experts are upbeat that PayPal’s rumored entry into crypto would be good for the industry—with greater exchange trading volumes ‘across the board’

PayPal is reportedly preparing to start directly selling cryptocurrencies to its 325 million users—with job vacancies for blockchain experts popping up on its careers site.

If confirmed, this would be a major U-turn for the fintech giant. Although PayPal’s CEO Daniel Schulman has previously confirmed that he owns Bitcoin, he has long warned that rampant volatility in the crypto markets make them impractical for everyday purchases.

“If PayPal does begin listing BTC, this will be a huge nod to the mainstream adoption […] I can see it starting a move to $13,000 or higher.”


Although the company has remained tight-lipped on the plans, CoinDesk on June 22 reported that the service could launch “in the next three months, maybe sooner.” Venmo, the digital payment app that’s a subsidiary of PayPal, would also offer crypto.

If true industry experts have told Modern Consensus that “this will be a huge nod to mainstream adoption.”

A threat to exchanges?

Given PayPal’s massive footprint in fintech, it’s perhaps understandable that some in the crypto industry fear losing market share should BTC become available to the masses. But speaking to Modern Consensus via email, NEM blockchain’s head of trading Nicholas Pelecanos suggested exchanges would likely see greater trading volumes across the board. The NEM Ecosystem’s XEM token is No. 30 by market cap, according to CoinGecko.

Nicholas Pelecanos says PayPal adding bitcoin could be good news for Facebook’s Libra stablecoin (Photo: NEM)

Pelecanos also predicted that PayPal foraying into crypto would help rather than hinder Facebook’s Libra stablecoin project. “I believe this will help speed up the process as major companies begin to realize that the payments space is going through a much-needed revolution,” he added.

He was reluctant to predict the proportion of PayPal users who would seize the chance to buy crypto assets—as factors such as the platform’s user interface, who it is offered to, and potential restrictions such as maximum purchase amounts could dampen demand. 

“I also imagine that some jurisdictions will have more stringent laws for PayPal to navigate before moving forward, and there are other considerations such as KYC processes and age restrictions,” Pelecanos continued.

Such a launch wouldn’t be without challenges, either. One huge hurdle concerns educating the public about how Bitcoin works, as well as its benefits and risks. And while firms such as Coinbase have succeeded in simplifying the process of buying and selling for newcomers, the NEM executive said “custody remains one of the most prominent pain points.”

Coinbase, along with cryptocurrency exchange Bitstamp, were cited as possible PayPal partners in the venture by CoinDesk’s sources.

Another challenge is persuading retailers that Bitcoin is safe to accept. As Schulman himself told Fortune magazine in November 2019: “Until it becomes less volatile, it won’t be a currency that is widely accepted by merchants on the web—not the dark web, but the web.”

When asked whether more merchants would begin accepting crypto as a payment method if PayPal supported it, Pelecanos said: “In light of more consumer adoption in the crypto space, with huge players ranging from Microsoft to Burger King accepting Bitcoin, I expect we will likely see retail adoption begin to rise as well.”

Are the rumors true?

As normally happens in the crypto space, the rumors have triggered a flurry of excitement among enthusiasts.

However, Pelecanos warned that a BTC sell-off could follow should PayPal announce that it has no plans to support cryptocurrencies. However, if the rumors are right, he predicted that the development could contribute to a brand-new bull run.

Are we on the edge of an institutional fear of missing out that could bring crypto into the mainstream?”

Seamus Donoghue, Metaco

“If PayPal does begin listing BTC, this will be a huge nod to the mainstream adoption which will increase its fundamental investment case,” Pelecanos told Modern Consensus. “I can imagine investors buying on this news, which is likely to push [bitcoin’s] price over the $10,500 level. Then the capital pool from the technical traders and momentum funds will flow in. All in all, pending the validity of this event, I can see it starting a move to $13,000 or higher.”

Business FOMO?

Seamus Donoghue, the vice president of sales and business development at the infrastructure firm Metaco, also agreed that PayPal’s involvement would drive adoption and fuel the crypto markets—and said it would be “the best news of the year for crypto adoption.”

He noted how Cash App, a division of Square, the payments company run by Twitter-founder Jack Dorsey, has successfully managed to make Bitcoin appealing to smaller investors. In fact, the firm told investors bitcoin transactions accounted for almost half of Square’s revenues in Q4 2019.

The next big crypto payments app? (Photo: PayPal)

Indeed, PayPal has previously warned in 10-K filings with the U.S. Securities and Exchange Commission that cryptocurrencies could negatively impact the company’s performance in the future.

“The news offers another affirmation that traditional payment players can no longer ignore the potential business opportunity presented by crypto, and are now even willing to risk disrupting their own fiat-based platforms,” Donoghue said in a release.

“In 2017, retail fear of missing out was the theme that drove BTC towards $20,000,” he said. “The interesting question now is: Are we on the edge of an institutional fear of missing out that could bring crypto into the mainstream?”

Konstantin Richter, the CEO and founder of the blockchain infrastructure firm Blockdaemon, added that he believes a “significant proportion” of PayPal and Venmo customers are likely to engage in crypto. The entrepreneur said hundreds of millions of users are already familiar with online payments—and PayPal has the upper hand because of its experience with Know Your Customer checks, regulatory issues, and design.

He too believes that Libra needn’t feel threatened. “Libra is a messaging payments tool, so will most likely benefit from, rather than compete directly with PayPal’s entry to the market.”

A new era?

Last October, PayPal sensationally withdrew from the Libra Association, which serves as the independent governing council for the global cryptocurrency project. This came after Facebook suffered a violent backlash from the U.S., Europe and further afield, with fears that the virtual currency could move global financial markets if it was adopted quickly. (The social network’s appalling record on protecting users’ data privacy didn’t help either.)

In a scathing statement after PayPal bowed out, the Libra Association’s head of policy and communications told Modern Consensus: “It requires a certain boldness and fortitude to take on an endeavor as ambitious as Libra… we’re better off knowing about this lack of commitment now, rather than later.”

Indeed, Libra has been going to great lengths to dust itself off from the beating it suffered at the hands of regulators last year. In April, it released a rewritten white paper that watered down some of its proposals—proving that the tech giant has no intention of going down without a fight.

Although the circumstances are different (there’s no suggestion that PayPal has any plans to launch its own cryptocurrency,) the fintech company will be hoping that it isn’t put through the wringer as it attempts to diversify into crypto.

It’s full steam ahead for Facebook’s Libra. We could be buying and selling crypto on PayPal come Christmas. The next few months are shaping up to be monumental for the industry, as that elusive goal of mainstream adoption and acceptance comes within grasping distance.

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.