PayPal has now jumped into the cryptocurrency space and now the financial market is set ablaze.
You heard it right! Paypal, after granted a conditional Bitlicense by the New York State Department of Financial Services, will now allow its PayPal users who are at approximately 346 million to buy, hold, and/or sell Bitcoin and other cryptocurrencies in 2021.
With that being said, PayPal customers would now be able to use cryptocurrencies like Bitcoin, Litecoin, Ethereum, Bitcoin Cash, and other digital coins for shopping at around 26 million stores or merchants all over the world.
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Consumers will also be able to quickly convert any selected digital coin balance to chosen fiat currency, with a specified value and not added fees. The good news is that there would also be no additional costs for merchants as transactions would be done using fiat currency following current PayPal rates.
In addition, PayPal is also planning to expand this service to Venmo and other international markets in 2021. PayPal is expecting this service to propel the global adoption of digital cash while also preparing its network for the arrival of central-bank issued crypto-cash.
PayPal CEO and President Dan Schulman is confident that their global reach, expertise in digital and fiat transactions, strict security and compliance process, as well as two-sided network will work to influence and empower the understanding and interoperability of digital currencies.
“The shift to digital forms of currencies is inevitable, bringing with it 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,” PayPal CEO Dan Schulman said in a statement.
More so, PayPal is also looking into a blockchain-based prototype or framework in future transactions. In fact, in 2019, PayPal Ventures has just invested in TRM Labs that help companies prevent financial crime and cryptocurrency fraud and also teamed up with Cambridge Blockchain, a disruptive blockchain-based identity management and compliance software company.
Paypal’s adoption of cryptocurrencies will surely strongly shape and revolutionize the role of digital currencies in international commerce. The popular payment gateway has also partnered with Paxos, a New York State chartered trust company, for custodial and cryptocurrency trading. This is a move to support PayPal’s entry into the cryptocurrency world.
Paypal is open to explore more of how blockchain-based systems can actually enhance the financial processes and ensure that these are more secure, reliable, speedy, and affordable.
PayPal Crypto Limitations
Another notable limitation is that PayPal users will not be able to transfer cryptocurrency to or from other wallets. The company will hold cryptocurrencies on behalf of users in an omnibus account and will keep a record of users’ interest in that omnibus account. According to PayPal, customers “do not own any specific, identifiable, Crypto Asset.”
Users that want to transfer funds will have to sell their Crypto Assets and transfer the proceeds using traditional means. PayPal did not immediately release information on whether it will eventually add functionality, allowing users to transfer cryptocurrency between non-PayPal wallets or to cold storage – cold storage is a way of holding cryptocurrency tokens offline.
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To educate their consumers, PayPal would be releasing informative content to help its users understand cryptocurrency generally as well as the risks and opportunities related to investing in cryptocurrency, in addition to information on blockchain generally.
The service will not include any fees when buying or selling cryptocurrency through the end of 2020, and there are no fees for passively holding cryptocurrency in a PayPal account.
In 2021, PayPal anticipates generating revenue when users buy and sell Crypto Assets by charging a spread between the market price it receives from Paxos and the exchange rate between U.S. dollars and Crypto Assets displayed to users.
PayPal’s jump into the crypto space is to sum it up, very witty and predictable, considering how fast and disruptive cryptocurrencies have been for the past years. Other financial companies and banks would soon be joining in and PayPal really want to be the catalyst of change in the mainstream market.