- >Three Major Takeaways from PayPal’s New Crypto Options
Three Major Takeaways from PayPal’s New Crypto Options
This October, fintech giant PayPal announced support for users to “buy, hold and sell cryptocurrency” as well as the ability for over 26 million merchants worldwide to receive payments in cryptocurrency. In a November update, the company said that eligible PayPal users in the US could now access the buy, hold and sell services right on the PayPal app, with the service set to be rolled out for other countries in 2021.
Hope Mutie | Dec 22, 2020
To say this move by PayPal, the biggest current force in online payments, is a big deal, is an understatement. Now the crypto industry is still nascent, and a lot could unfold in the coming years. But it has also proved pretty resilient under the not-most-conducive of conditions. This new development by PayPal, which has a user base of 340 million+ users, could herald even bigger things for crypto.
What’s in the Deal?
PayPal has rolled out the buy, sell and hold crypto functions beginning with Bitcoin(BTC), Bitcoin Cash(BCH), Ethereum(ETH), and Litecoin(LTC). Other cryptocurrencies are set to be added progressively. Users will have the ability to store crypto in an in-app wallet provided by PayPal. From early next year, PayPal account holders will also have the ability to pay with their crypto for services provided by 26 million merchants worldwide connected to the platform. The company will also expand these capabilities to its peer-to-peer payment subsidiary platform Venmo – which currently features more than 40 million users. This is expected to happen in the first half of 2021.
At the same time, PayPal is going to provide educational content about cryptocurrency, its opportunities, and associated risks. This is incredibly important; cryptocurrency is still vastly misunderstood – even feared. Most people share the sentiments of US Senator Thomas Carper, who has described crypto as having “captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” These pervasive notions about crypto have prevented people from jumping on the crypto train and, in that way – held it back from going mainstream. The first step to getting crypto to go mainstream is to dispel the aura of complexity that surrounds it. For PayPal – a finance platform trusted and respected by millions, to educate its base about cryptocurrency – that’s major.
What it Means for Cryptocurrency
PayPal’s globally trusted and respected position as a fintech pioneer means that for it to recognize the importance of crypto, and onboard it, is a giant step for the industry. So, what are the specifics?
1. Crypto Will Gain More Value
The crypto industry instantly reacted positively to the news that PayPal would be dabbling in crypto – which says a ton. When the news was still hot off the press, Bitcoin’s price was already surging – with the crypto breaking through the $13k threshold and rallying above that level for the first time since July 2019. It’s safe to say that’s a distant memory with Bitcoin currently flirting with $25,000. Both Litecoin and Bitcoin Cash also experienced jumps.
Galaxy Investment CEO Mike Novogratz noted on Twitter how banks “will now be on a race to service crypto.” This bull run was triggered by the mere mention of PayPal getting in crypto – signifying the vast new possibilities it could unleash for space. PayPal getting into crypto kind of rubber stamps it for skeptics and newcomers. It’s not a stretch at all to suggest that other legacy payment platforms will mimic the trend sooner than later. This would be good news for the adoption of crypto as it would help push it closer to mainstream finance.
2. Crypto Will Be Pushed Closer to the People
The average person who is oblivious of crypto would (understandably) struggle to get what the fuss is about. We have a money system that works just fine – so why do you have to go and rock the boat? Only once they begin to understand the underlying principles, concepts and vision do they realize it’s like a gift that they didn’t know they needed. PayPal’s onboarding of crypto shows the world that crypto matters. Anybody who’s been paying attention will tell you digital assets will only go from strong to stronger. Crypto will massively disrupt the old school finance system as people realize the new system is more trustworthy – whether in terms of philosophy, as a means of storing wealth and downright reliability. PayPal recognizes this, noting “the shift to digital currencies is inevitable” and highlighting the core strengths of cryptocurrency – from financial inclusion, to efficiency, to speed, to the ability to disperse money quickly.
3. Crypto Takes on More Utility
When Satoshi created Bitcoin, he envisioned it as a “peer-to-peer electronic cash system.” That means Bitcoin was supposed to facilitate day-to-day payments. It would be infinitely more secure than the legacy payments system, faster, cheaper, and outside of any centralized control. Today we know that’s not the case. Bitcoin and the vast majority of cryptocurrencies act more like investment assets than payment models – thanks in no small part to their notorious volatility. That means crypto users don’t get to enjoy the full benefits of crypto – a state of affairs that PayPal wants to change. Users will now be able to pay for orders via crypto – right on their wallet – without incurring incremental fees and with certainty of value. This goes a long way to restoring confidence in crypto as a funding source and a legit currency accessible to the regular person.
That said, it’s crucial to highlight the caveats that crypto users on PayPal will have to contend with – at least initially. While the new direction by PayPal is worth celebrating, it appears the company is not planning to give users carte blanche when it comes to managing their own cryptocurrency. Number one – it’s not going to allow users to manage their private keys. The issue of non-custodial ownership of one’s funds is a hot-button one in the crypto space – cue the popular “not your keys, not your crypto” saying.
The tight grip on user funds by PayPal means you’ll not be able to move your crypto around – you can’t send money to other users on or outside of PayPal. This will undoubtedly be a downer for veterans who know their way around crypto. But we need to make room for the fact that once you lose your private keys – your money goes with them. This isn’t to instill fear – but newcomers to crypto might turn out to appreciate being cushioned from the potential risk of controlling their own keys.
In similar fashion, PayPal is imposing a $20,000 weekly purchasing cap and a cap of the same amount for any single purchase.
It’s understandable that PayPal is applying these brakes on their crypto services, seeing as the company is dipping their feet in the water for the first time. Remember, the idea here is to introduce crypto to millions of uninitiated people everywhere. The bad of not having complete control of their funds is outweighed by the good of the bigger picture.
PayPal’s bold move to support cryptocurrencies bodes well for the budding industry in more ways than one. As a leader in the fintech space, the company’s stamp of approval could help push the crypto industry to wider acceptance and recognition. Crypto itself has so far demonstrated that it’s unstoppable, and PayPal’s involvement – which is only beginning, is poised to push it to greater heights.