PayPal has announced that it is jumping into the wild world of cryptocurrency, making it possible for wallet holders to buy, sell and hold cryptocurrencies like bitcoin, ethereum, bitcoin cash and litecoin in their PayPal accounts. And starting in 2021, they will be able to spend their crypto caches with any of the 26 million merchants currently accepting PayPal. According to CEO Dan Schulman, the hope for the expansion is to help grow the global use of virtual coins and to prepare the firm for a future where there are more coins in play in the care of central banks and corporations.
“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,” Shulman said in announcing the move.
PayPal isn’t the first big name in tech to jump on the crypto bandwagon. The Robinhood trading app has allowed crypto since 2018, and Square users have been able to trade in crypto for over a year.
PayPal’s entrance into the arena is eye-catching largely owing to its size and scale. With 346 million active accounts, more than $222 billion in payments processed during Q2 and tens of millions of merchants on the platform, PayPal offers yet another bite at mainstream credibility that it has often struggled with, due largely to its historical popularity among cybercriminals and currency speculators. Those known associations, combined with the fact that crypto transactions are both slower and more expensive to process, have meant that historically, virtual coins have not generated much in the way of love from either mainstream consumers or merchants.
But PayPal’s latest launch looks to take some of the uncertainty out of the deal by allowing the merchant to accept crypto payments while still settling all cryptocurrency transactions in fiat currency. That means merchants can accept crypto payments from customers without having to actually deal with virtual currencies themselves.
Moreover, PayPal isn’t alone in its attempts to make a space for crypto on widespread mainstream rails — PayPal’s announcement follows an announcement by Visa and Ternio of their collaboration to help crypto companies and FinTechs come to market with crypto payments that ultimately ride the Visa rails — and are therefore accepted by any business or merchant that accepts Visa online or off.
It’s beginning to look like the Wild West days of the cryptocurrency market are coming to something of a close as the big names in the payments game are increasingly opening up to let crypto — with lots of controls — into the wider ecosystem.
The Mainstream Move To Tame The Wild West
Crypto has long been shorthand for speculation in lightly-regulated coins and tokens whose main functions seemed to be making or losing fortunes in a few trades. At best. At worst, they provided a reliable payment mechanism for cybercriminals and child pornographers plying their trades on the dark web.
But crypto Ternio co-founders Ian Kane (COO) and Daniel Gouldman, (CEO) told Karen Webster in a recent interview that crypto is ready to be a lot more than that. They envision a future where the blockchain rails that underpin it are finally connected to legacy financial providers. Once that happens, the digital payments ecosystem as a whole will be able to more fully push the use of cryptocurrencies or even digital fiat currencies issued by central banks, Kane and Gouldman said.
That, they noted, is why Ternio signed on with Visa’s Fast Track as a cryptocurrency-focused enablement partner. Visa was once hesitant when it came to crypto — and held off before offering its full blessing. Today, Kane noted, that reluctance as fallen away as Visa is now instead looking to lead the pack.
“They’re a payments company, and they understand what blockchain can do,” he said. “And they understand that the digital assets that transact on top of blockchain all have value. It’s not about bitcoin, ethereum or a specific cryptocurrency, but rather the potential to turn cryptocurrency into a spendable asset at the physical or digital point of sale.”
And with PayPal’s new announcement and added capability coming in a few short months, it seems like Visa isn’t alone in seeing cryptocurrency’s potential as a spendable asset instead of mostly just a tradable commodity.
If They Build It — Do Consumers Actually Come?
But the question remains: what do consumers actually want from crypto? They don’t pay for much with crypto today — a fact easily explained by the reality that not that many merchants actually accept it.
That, care of major names in the payments game like PayPal and Visa, looks ready to change, as merchants can now offer the method without having to take on the friction of converting crypto into fiat themselves. Which means the spotlight falls to consumers — and whether, now that they can pay with crypto, they will actually do so.
And that, by all accounts, seems a pretty open question. Some crypto formats — bitcoin most famously — tend toward very volatile prices, which will likely chill enthusiasm for them as a commercial vehicle since overnight changes can mean the goods one bought with a bitcoin today could end up becoming more expensive tomorrow as the price of the currency itself changes.
And cryptocurrency remains mostly a niche product — most consumers don’t know much about it or express much interest in its use. That, as PayPal alluded to in its statement, could change, particularly if crypto starts being issued by central banks and major corporations such that it becomes a more recognizable part of financial life.
The recent upgrade might not convince any consumer today — but perhaps it might make them more ready when the killer crypto product comes along someday and does.