PayPal launches new cryptocurrency service to buy and sell bitcoin

PayPal joined the cryptocurrency market on Wednesday, allowing customers to buy, sell and hold bitcoin and other virtual coins using the U.S. digital payments company’s online wallets.

PayPal customers will also be able to use cryptocurrencies to shop at the 26 million merchants on its network starting in early 2021, the company said in a statement.

PayPal hopes the service will encourage global use of virtual coins and prepare its network for new digital currencies that may be developed by central banks and corporations, President and Chief Executive Dan Schulman said in an interview.

‘We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role,’ he said.

PayPal joined the cryptocurrency market on Wednesday, allowing customers to buy, sell and hold bitcoin and other virtual coins (file photo)

American account holders will be able to buy, sell and hold cryptocurrencies in their PayPal wallets over the coming weeks, the company said. It plans to expand to Venmo and some countries in the first half of 2021.

Other mainstream fintech companies, such as mobile payments provider Square and stock trading app firm Robinhood Markets, allow users to buy and sell cryptocurrencies, but PayPal’s launch is noteworthy given its vast reach.

The company, based in San Jose, California, has 346 million active accounts around the world and processed $222 billion in payments in the second quarter.

Cryptocurrencies tend to be volatile, making them attractive to speculators, but a lot less appealing to merchants and shoppers. Transactions have been slower and more costly than other mainstream payment systems.

Cryptocurrency payments on PayPal will be settled using fiat currencies, such as the U.S. dollar, meaning merchants will not receive payments in virtual coins, the company said.

Many central banks around the world have expressed their intention to develop digital versions of their currencies in the coming years, while Facebook Inc-led the creation of a cryptocurrency project called Libra in 2019.

Cryptocurrencies tend to be volatile, making them attractive to speculators, but a lot less appealing to merchants and shoppers (stock illustration)

PayPal was a founding member of the Libra project but dropped out after a few months.

Before launching its new crypto offering, PayPal was granted a first-of-its-kind conditional Bitlicense by the New York State Department of Financial Services (NYDFS).

‘NYDFS’ approval today follows our June 2020 announcement for a new framework for a conditional Bitlicense to encourage, promote, and assist interested institutions to have a well-regulated way to access the New York virtual currency marketplace in a way that is both timely and protective of New York consumers, through partnerships with New York authorized virtual currency firms,’ said NYDFS Superintendent Linda A. Lacewell in a statement.

‘NYDFS will continue to encourage and support financial service providers to operate, grow, remain and expand in New York and work with innovators to enable them to germinate and test their ideas, for a dynamic and forward looking financial services sector, especially as we work to build New York back better in the midst of this pandemic.’

PayPal will initially allow purchases of bitcoin and other cryptocurrencies called ethereum, bitcoin cash and litecoin, the company said.

It partners with Paxos Trust Company to offer the service.

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