- >Why Did PayPal Change Its Mind About Bitcoin?
Why Did PayPal Change Its Mind About Bitcoin?
In one of the biggest moves related to bitcoin in 2020, PayPal has decided to embrace the cryptocurrency, along with Ether, Bitcoin Cash, and Litecoin. PayPal is the largest institution in existence when it comes to fintech companies around the world, and there is no other brand that is more synonymous with online payments. While PayPal only has plans to allow their users to hold value in bitcoin and three altcoins for now, it’s likely these integrations will grow and expand over time. For now, the largest benefit of this move by PayPal for bitcoin may be as a sort of stamp of approval from one of the most reputable and trusted digital financial institutions.
CryptoVantage Staff | Nov 17, 2020
PayPal Was Not Always a Fan of Bitcoin
PayPal has a somewhat mixed history when it comes to bitcoin. In the earliest days, many people wanted to trade bitcoin in a peer-to-peer manner via PayPal, but this proved difficult for a variety of reasons. The main issue was that PayPal transactions are reversible but bitcoin transactions are basically final after one confirmation. This led to a large amount of fraudulent activity related to bitcoin trades on the PayPal platform. Instead of looking into this matter deeply, PayPal turned off a large number of Bitcoin users by basically making it clear that PayPal users are on their own in situations of fraudulent bitcoin trades. For a long period of time, the main way to trade between PayPal and bitcoin was via a niche virtual currency exchange known as VirWox.
Despite this, there have also been signs over the years that PayPal may eventually embrace bitcoin and other cryptocurrency. For example, Braintree, which is a subsidiary of PayPal, actually enabled bitcoin payments as far back as 2015. Although, these payments were not true Bitcoin transactions, as they could only be made via a Coinbase account.
You can even go back further to 2014 to find a statement from the eBay CEO, which still owned PayPal at the time, where he made it clear that the auction site was actively considering the integration of bitcoin.
By 2016, it became increasingly clear that PayPal would eventually launch some sort of cryptocurrency integration on their platform, as Xapo CEO Wences Casares joined PayPal’s Board of Directors.
Eventually, PayPal’s largest foray into the bitcoin market took place in 2018 through a partnership with Coinbase in which users were able to instantly withdraw dollars in their Coinbase account to their PayPal accounts.
Despite all of this bitcoin-related activity over the years, the original CEO of PayPal, Bill Harris, was still referring to bitcoin as a pump-and-dump scam as recently as 2018.
What Happens Next?
It should be made clear that the bitcoin integration that is currently being rolled out to PayPal users is rather limited. For now, PayPal users will only be able to convert their dollars into bitcoin, Ether, Bitcoin Cash, or Litecoin. While this limited functionality has been mocked in some circles, the reality is that enabling PayPal’s more than 300 million users to convert fiat currency into cryptocurrency with the click of a button is a big deal.
Sure, bitcoin functionality on PayPal is rather sparse right now, but the fintech giant has already made it clear that bitcoin and other cryptocurrencies will be enabled as a source of funds for payments made via the PayPal platform in 2021. And things are unlikely to end there. While PayPal users are unable to take full custody of their bitcoin today, it’s likely that this is a short-term measure due to concerns around the security of funds and potential regulatory issues. As these problems around security and regulation are solved over time, it’s likely that PayPal users and users of any other digital banking platform will be able to take full control over their own Bitcoin private keys. This is simply a continuation of a trend where the worlds of cryptocurrency and fintech will merge together over time. More cryptocurrency companies like Coinbase will continue to look more like traditional fintech companies over time, and fintech institutions like PayPal and Square will also continue to integrate bitcoin and other crypto assets more tightly into their apps.