PayPal has launched a service that will allow customers to trade and exchange cryptocurrencies directly from their account and through compatible merchants.
Bitcoin, Ethereum, Bitcoin Cash, and Litecoin can be bought and sold directly from PayPal's new digital wallet within the coming weeks, ahead of plans to make it available as a funding source for purchasing goods through the platform next year.
The platform will also provide account holders with training and guidance about cryptocurrencies to help them understand the ecosystem and the risks associated with investing in these blockchain-powered tokens.
This is arguably the most significant moment in continued efforts to bring cryptocurrencies into the mainstream, given PayPal's position as one of the most popular online financial services.
“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," said PayPal CEO and president, Dan Schulman.
"Our global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange.”
The service – which will be available to US users in the coming weeks and internationally by 2021 – is being powered by a partnership struck with the Paxos Trust Company, a regulated provider of cryptocurrency services. PayPal has also been granted a conditional ‘Bitlicense’ by the New York State Department of Financial Services, which is required for any services wishing to trade in bitcoin.
From early next year, customers will also be able to use their cryptocurrency holdings as a source to pay for goods from the company’s 26 million registered merchants across the globe. Consumers will also be able to convert their cryptocurrency balances into fiat currencies with the certainty of value and no incremental fees.
However, at this stage, there’s little indication as to how PayPal will be able to guarantee the certainty of value on any exchange, and concerns will inevitably remain as to whether cryptocurrencies will be stable enough to use over traditional currency in payment for goods. Bitcoin, for example, has fluctuated with extreme volatility in the last few years, and although it may have been relatively stable for the last few months, the value of the currency is still prone to swings.
Pay Pal has suggested that all transactions will be “settled with fiat currency at their current PayPal rates”. This means, in effect, that digital payments will become another funding source within the PayPal digital wallet, which also includes payment cards and various fiat currencies. The firm claims this will address previous concerns surrounding volatility, cost and the speed of cryptocurrency-based transactions.
There’s also a lack of clarity over whether PayPal’s extensive protection policies for buyers and sellers will apply to transactions made using cryptocurrencies. Given the fact these will effectively be another funding source sitting alongside other currencies and payment methods within the PayPal digital wallet, the normal levels of protection should apply.
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Keumars Afifi-Sabet is a writer and editor that specialises in public sector, cyber security, and cloud computing. He first joined ITPro as a staff writer in April 2018 and eventually became its Features Editor. Although a regular contributor to other tech sites in the past, these days you will find Keumars on LiveScience, where he runs its Technology section.