The news of PayPal integrating crypto is just a fad. Despite the initial market fervor, it will fade away and we’ll be back to where we started.
There have been several watershed moments in the crypto industry’s history. These moments have brought with them significant influence and have changed the course of the industry for a lot of people. In a way, you could say they allowed for the inclusion of more people in the crypto space and provided an avenue for others to see digital assets’ potential.
We could say one such moment came this week, when top payment processor PayPal announced that it would begin offering crypto payments.
Reuters reported that PayPal will allow its customers to access cryptocurrencies and shop at any merchant that uses its services from next year. As explained, the company plans to settle payments through fiat currencies – in a similar way to services like BitPay. So, customers pay with crypto, PayPal handles the conversion process, and the merchants get their fiat currencies directly.
For now, PayPal will begin with Bitcoin, Ether, Litecoin, and Bitcoin Cash. The company has reportedly gotten the required licensing and even partnered with several crypto-centric firms to get this service through to customers.
Beyond payments, PayPal also reportedly plans to make people purchase crypto directly from its app. So, starting from 2021, the firm will provide users with a crypto wallet that will allow them to but, sell, and hold their digital asset holdings.
The news is big for several reasons. PayPal is arguably the biggest digital payment processor in the world. Data from Statista showed that the company had $222 billion in transaction volumes processed in the second quarter of this year, while its user base surged to 346 million. By providing crypto access to these people, the company is essentially allowing for a potential surge in adoption that would allow users to finally use their digital assets as they like.
As anyone could expect, the news about PayPal’s integration has sent Bitcoin surging. Since the news hit mainstream media, Bitcoin has gone on a tear, with data form CoinMarketCap showing that the asset reached a high of $13,200 on Thursday.
It is understandable that Bitcoin will surge following the news. Many have been clamoring for adoption from large companies for years, and it finally looks like we could get that. PayPal is finally joining the fold and showing that Bitcoin has potentials for payment efficiency
However, there isn’t much news about this that suggests this rally would last. To be fair, it’s worth noting that PayPal’s crypto integration is great news and the type of development that will excite investors. However, when you look at what it signifies, you’ll find that this rally it brings won’t be long-lived.
It’s Not the First Time
We already have a payment processor that offers crypto. Square launched its Cash App long ago, allowing seamless crypto payments and transfers to people who need the cash. Square is a big tech company, founded by Jack Dorsey.
Perhaps the only thing that separates this is the fact that PayPal is bigger company than square. Also, Dorsey is an avid crypto enthusiast, so it wasn’t so surprising to find that his company would pivot and make the case for crypto.
For one, this integration doesn’t solve Bitcoin’s fundamental issue – payment efficiency. PayPal integrating crypto doesn’t mean that crypto will be a better payment tool than it already is. Many have complained about Bitcoin in particular, noting that excessive congestion has made the network slower and opened it to compromise.
This lack of payment efficiency is one of the many reasons why many countries are now considering Central Bank Digital Currencies (CBDCs). These countries understand that a digital version of their currencies will be necessary to improve their financial systems, but they know that the answer isn’t in Bitcoin.
The fact that crypto still isn’t a perfect payment solution means that people still might not be willing to enjoy its benefits. So, there is work to be done to ensure that this integration lives up to its potential.
The Need for Education
Then, there’s the fact that crypto payments still aren’t popular enough. It’s great that PayPal is bringing crypto to more people, but it sure doesn’t help that people themselves won’t be able to use it.
There have been several forums and explainers that dissect why cryptocurrencies are just so difficult to use. Unlike using a normal credit card or even a payment processor, you need to almost jump through hoops and ladders to get digital assets sent from end to end.
So, again, it’s great that PayPal is integrating crypto. However, if there’s no framework that can allow for crypto to be less complicated, one has to wonder how advantageous this solution will be at the end of the day. The solution for this is simple – people need to get the right form of crypto education. Now that it seems crypto is making its way into society, people need to get familiar with it. They need to see where it shines, where it might need a little bit of work, and how effective it will be for them in specific scenarios.