PayPal announced it will allow customers to hold bitcoin and other cryptocurrency in its wallet and shop using cryptocurrencies at the 26 million merchants on its network.
The new service makes PayPal one of the largest US companies to provide consumers access to cryptocurrencies, which could help bitcoin and rival cryptocurrencies gain wider adoption as viable payment methods.
The New York State Department of Financial Services said it had granted PayPal a conditional “Bitlicense”, permitting it to trade and hold cryptocurrencies.
In the coming weeks, PayPal plans to offer its US-based customers the ability to buy, sell and hold bitcoin, ethereum, bitcoin cash and litecoin, in partnership with New FinTech Paxos.
The company hopes the service will encourage global use of virtual coins and prepare its network for new digital currencies that central banks and companies may develop, President and Chief Executive Dan Schulman said in an interview.
“We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role,” he said.
The ability to make payments with cryptocurrencies will be available from early next year, the company said.
Other mainstream FinTech companies, such as mobile payments provider Square and stock trading app firm Robinhood Markets, allow users to buy and sell cryptocurrencies, but PayPal’s launch is noteworthy given its size.
The company has 346 million active accounts around the world and processed $222 billion in payments in Q2 2020.
Bitcoin and other virtual coins have struggled to become established as widely used forms of payment despite being around for more than a decade. Cryptocurrencies’ volatility is attractive for speculators, but poses risks for merchants and shoppers. Transactions are also slower and more costly than other mainstream payment systems.
PayPal believes its new system will address these issues as payments will be settled using traditional currencies, such as the US dollar. This means PayPal will be managing the risk of price fluctuations and merchants will receive payments in virtual coins.
“We are going about it in a fundamentally different way to make sure we provide the maximum amount of safety to our merchants,” Schulman said.
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