PayPal will soon begin offering support for cryptocurrencies, as the Silicon Valley payments company looks to capitalise on a resurgence of interest among consumers and traders in the likes of bitcoin and ethereum.
The New York State Department of Financial Services said on Wednesday 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 York-based fintech start-up Paxos.
PayPal told Reuters on Wednesday that its customers would be able to use cryptocurrencies as a funding source to pay at millions of retailers from next year.
“The shift to digital forms of currencies is inevitable,” said Dan Schulman, president and chief executive of PayPal. “We are eager to work with central banks and regulators around the world to offer our support, and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce.”
The move is the latest example of a more traditional financial services company revisiting virtual currencies this year. The coronavirus pandemic has accelerated a shift away from cash towards digital payments, both online and on the high street.
The price of bitcoin has gained steadily in recent months on elevated trading volumes, rising by more than 70 per cent since the beginning of January. This week, bitcoin was testing the $12,000 mark for the second time this year. However, prices remain far below the levels seen during the bitcoin frenzy of late 2017.
PayPal’s decision to embrace bitcoin and other digital coins has been eagerly awaited by the crypto community, as an opportunity to tap into the mainstream consumer payments market. PayPal and its social payments app Venmo have almost 350m active accounts around the world, making it one of the largest digital wallet providers outside China.
Until now, PayPal could be used only to transfer funds in and out of cryptocurrency platforms such as Coinbase but not hold or trade crypto directly within its own app.
PayPal’s stance on crypto has fluctuated over recent years. Last October, PayPal was the first of what would be several companies to withdraw from the Libra Association, as regulatory uncertainty clouded the Facebook-led cryptocurrency venture.
But earlier this year, in a letter to the European Commission, PayPal hinted that it was revisiting the market, saying it was “continuously monitoring and evaluating global developments in the crypto and blockchain/distributed ledger space”. It said it hoped the technology could “achieve greater financial inclusion and help reduce [or] eliminate some of the pain points that exist today in financial services”.
Meanwhile, PayPal’s main US rival Square has offered bitcoin support through its Cash app for more than two years. Square’s co-founder Jack Dorsey has long been bullish on cryptocurrencies. In August, Square reported that its Cash app generated $875m in bitcoin revenue during the second quarter of the year, up 600 per cent year on year, thanks to “growth in customer demand”.