PayPal opens up to cryptocurrencies: bitcoin will be accepted for payments

PayPal was one of the first players to revolutionize the payments sector by paving the way for many new players.

Today, it is the first major global financial operator to announce that it is ready to accept payments in cryptocurrencies. Even if for the moment the option will only be allowed to American users – but soon also in other markets -, the decision of PayPal paves the way for cryptocurrencies to its 346 million customers and 26 million merchants globally. Starting from 2021, alongside the 24 currencies accepted today by the payment platform, there will also be bitcoin, bitcoin cash, ether, and litecoin.

PayPal Partner with Paxos to create a safe payment system

Thanks to the partnership with Paxos Trust Company, which will take care of trading and custody services, and a “bitlicense” obtained from the Department of Financial Services of the State of New York. PayPal will allow its users to buy and sell cryptocurrencies safely and most comfortably. PayPal will then accept bitcoin and other digital currencies as a payment tool.

But the almost twelve-year history of bitcoin has shown that crypto currencies are far from being an effective tool for daily transactions. Not so much for the efficiency of a system that allows payments between peers, without the intermediation of banks or other operators, but due to the frightening volatility that frustrates their stability as a means of payment.

The PayPal announcement showed that bitcoin is more of an asset class than a stable instrument. The news has jumped the prices by almost 8% to close to $13,000 compared to just under $12,000 24 hours before. And current bitcoin price is more than double the low of around $5,000 hit in March.

The PayPal payment system would use bitcoin only as a means, immediately transforming it into fiat currencies, without exchange rate risk.

The system provides a fixed fee for PayPal of $0.50 for transactions under $25 and commissions to scale from 2.3% up to 1.5% above a thousand dollars.

PayPal accepts bitcoins as a payment currency pending central bank approval

As we have earlier stated, starting from the beginning of 2021 in the US, and then throughout the year in the rest of the world, the 346 million PayPal users will be able to buy, sell and store cryptocurrencies directly from their PayPal account. Not only that, users will be able to pay for their purchases in cryptocurrency in the 26 million shops globally affiliated with PayPal.

To avoid the risks of bitcoin & co. Price volatility, customers, and merchants will be able to instantly convert cryptocurrencies into legal tender currency in the country where the transaction takes place, PayPal announced, with a certain value and without additional fees.

The adoption of crypto currencies is to be read as the first step of the US payments giant to prepare its network, given the arrival of digital currencies issued by central banks.

It should be remembered that PayPal was one of the financial entities that had initially lined up alongside Facebook in the initial phase of the Libra project, only to slip off after verifying the resistance.

PayPal is not the first US Fintech company to open up to cryptocurrencies.

Digital payment service operators like Square and the Robinhood Markets stock trading app already do. But they’re not the size of PayPal, which has 346 million active users and processed $222 billion in payments in the second quarter of the year alone.

PayPal’s announcement has skyrocketed its shares on Wall Street, where it now capitalizes almost 250 billion dollars. And has also moved up the prices of all cryptocurrencies, starting with Bitcoin, which has reached almost $13,000. If the volatility of cryptocurrencies is destined to remain. In that case, there is no doubt that PayPal’s announcement somehow “institutionalizes” them. It also makes them popular even to those who until now had considered them only a speculative tool.

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