- PayPal gets into the cryptocurrency space across its 26 million merchants.
- Initially, Bitcoin Cash, Litecoin, Bitcoin and Ethereum would be introduced with no transaction fee till 31st December 2020.
- PayPal also secured first of its kind Conditional Bitlicense from New York State Department of Financial Services.
- Previously, Investments in TRM Labs and Cambridge Blockchain were made in a quest to build an entire ecosystem of cryptocurrencies.
On 21st October, PayPal (NASDAQ:PYPL) announced its entrance into the cryptocurrency market, enabling its customers to transact bitcoins and other cryptocurrencies through their PayPal accounts. This represents the company’s vision to enable its 26 million merchants to accept cryptocurrency as a funding source for the purchases.
PayPal is a juggernaut in the global digital payment solutions with more than 20 years of robust presence across the globe. The company is focused on providing consistent, affordable,and secure payment solutions by leveraging the highest grade of technologies.
The main hindrance towards the adoption of cryptocurrency on a mass scale is its minimal acceptance primarily due to volatility in its price, cost, and speed of the transaction. The company expects that this can be changed with the introduction of better technologies.
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To increase the adoption of cryptocurrency, PayPal is introducing four currencies, namely; Bitcoin Cash, Litecoin, Bitcoin and Ethereum. The services would commence in the coming weeks in the US only. There are expansion plans also to bring the services to Venmo and select international markets in the first half of 2021.
To gain the initial traction, PayPal is not charging any fees on the transaction of cryptocurrencies till 31st December 2020 and no fees is there for holding these currencies.
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The company has also been granted first of its kind conditional Bitlicense, approved by New York State Department of Financial Services. This will ensure a well-regulated and structured marketplace to access virtual currencies, making it much safer for the consumers.
To further educate the customers regarding the use of these currencies, associated risks, and opportunities, PayPay is also set to provide its educational content.
How the ecosystem would work
From early 2021, PayPal customers would be able to transact their cryptocurrencies held in their PayPal accounts with 26 million merchants. The consumers would be able to convert their existing fiat currency to cryptocurrency with certainty of value. On the other hand, merchants would not require any additional integration as all the transactions would be settled with fiat currency at their current PayPal rates.
To put it simply, it adds another funding source, addressing the concerns regarding volatility, speed of transaction and associated cost.
Exploring Next-gen financial services infrastructure
In a quest to develop an entire ecosystem of cryptocurrencies, the company has been continually exploring new technologies and avenues through investing and partnerships with fintech firms and central banks around the world.
In 2019, the company invested in TRM Labs through its venture capital arm, PayPal ventures. TRM Labs is a fintech focused on preventing financial frauds like money laundering through cryptocurrencies and to ensure the highest level of compliance. Another prominent investment was made in Cambridge Blockchain, which provides Blockchain-based identity management and compliance solutions.
PayPal had always been investors’ go-to stock in the large-cap fintech space. After the Coronavirus pandemic, the PayPal shares seemed to have gained even more traction which led to a healthy gain of more than 80% in the last six months alone. On 21st October, the stock surged by 5.5% and closed at $213.07, after making a new 52-week high of $215.77.