PayPal has announced that from 2021 it will support payments through some cryptocurrencies, which in the initial phase will be Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC). To integrate this new management into its systems, for the legal part it obtained a conditional license for cryptocurrencies, the one known as BitLicense, by the New York State Department of Financial Services, and for the technical part it signed an agreement with Paxos, a known provider of cryptocurrency services and products. Initially, this new support will be limited to customers in the USA, but PayPal plans to extend it to other countries later in the year.
Founded as Confinity in 1998 in the field of computer security for mobile devices, it became PayPal after its merger with X.com, an online banking company founded by Elon Musk, in 2000. Purchased by eBay in 2002, it became a spinoff company with an IPO in 2015. Today, over 300 million people around the world use its financial intermediary services, but its platform is closed and proprietary. On the one hand, it offers guarantees in credit card payments and money transfers, on the other it can impose restrictions on access and use of the money in your PayPal account.
PayPal, like banks, looks like a company with a policy of managing their users’ money that is opposed to the philosophy behind cryptocurrencies. Despite that, it was initially part of the Libra Association, the organization led by Facebook with the aim of creating a payment system based on blockchain, the technology behind cryptocurrencies, but the company announced the withdrawal from the project following a lot of criticism and problems, also from the legal point of view. However, in recent months, the first rumors spread about a possible adoption of existing cryptocurrencies and now the confirmation has arrived.
PayPal’s CEO Dan Schulman (photo ©PopTech, Kris Klug) stated that the shift to digital forms of currencies is inevitable, and will bring various benefits. However, opening up to cryptocurrencies, based on the user’s complete control of their wallet, is remarkable, and it will be interesting to see how two ways of looking at money management that seem opposite will integrate. Actually, the recent agreement with the cryptocurrency trading platform BitFlyer already allows you to buy some cryptocurrencies through PayPal, but now the company will directly manage those transactions, initially for users in the USA to gradually expand to other countries and to Venmo, a PayPal subsidiary which offers a mobile payment service.
Thanks to the agreement with Paxos, people with a PayPal account will be able to buy cryptocurrencies directly from Paypal, hold them and sell them. Initially, Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC) will be supported. It will be possible to pay for products and services using these cryptocurrencies as if they were conventional currencies, the ones called fiat in jargon.
There are people who argue that PayPal’s move is a reaction to the investment in Bitcoin by Square, the mobile payments company created by Twitter founder Jack Dorsey. It wouldn’t be surprising because PayPal needs to stay on the frontier in its field and today, cryptocurrencies represent the frontier. Meanwhile, after PayPal’s announcement, the value of many cryptocurrencies, not just the ones that will initially be supported, has risen sharply. We will see next year how the union between what seem to be two very different worlds will work.