Paypal Holdings Inc has delved into the digital currency market. The fintech company announced Wednesday that its customers could now buy, sell and hold bitcoin and virtual payments using the company’s online wallets.
The announcement resulted in the surge of bitcoin price on Wednesday. The company said its customers will also be able to use cryptocurrencies to shop at the 26 million merchants on its network starting in early 2021.
Under its cryptocurrency platform, US account holders will be able to buy, sell and hold cryptocurrencies in their Paypal wallets over the coming weeks. Consumers will be able to convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees. The company said it plans to expand to Venmo and some countries in the first half of 2021.
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“Paypal merchants will have no additional integrations or fees, as all transactions will be settled with fiat currency at their current Paypal rates. In effect, cryptocurrency simply becomes another funding source inside the Paypal digital wallet, adding utility to cryptocurrency holders,” the company said in a statement.
Paypal president and Chief Executive Dan Schulman said the company hopes the newly introduced 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.
“We are working with central banks and thinking of all forms of digital currencies and how Paypal can play a role,” he said.
Many central banks around the world, including China, are planning to develop digital currencies alternative to their fiat currencies.
“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 Schulman.
Paypal has 346 million active users around the world and a record of $222 billion processed payment transactions in H1 of the year. The company believes its widely used platform will offer users around the world a chance to carry out cryptocurrency transactions as more countries embrace the national digital currency idea.
“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,” added Schulman.
Paypal plans to feature Bitcoin, Ethereum, Bitcoin Cash and Litecoin, directly within the Paypal digital wallet. The financial service provider plans to develop the new platform through a partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.
To offer the digital currency services, Paypal secured a “first-of-its-kind” conditional Bitlicense from the New York State Department of Financial Services (NYSDFS). The Bitlicense means Paypal with commence cryptocurrency services in New York.
The company said it will provide account holders with educational content to help them understand the cryptocurrency ecosystem, the risks and opportunities related to investing in cryptocurrency, and information on Blockchain technology.
Paypal said the idea will be developed through partnership as it tries to explore the next generation of digital financial services infrastructure and enhancements to digital commerce through an internal blockchain-focused research team.
The company had in 2019, invested in TRM Labs, a company focused on helping financial institutions prevent cryptocurrency fraud and financial crime, and Cambridge Blockchain, a blockchain-based identity management and compliance software company. It was also a partner in Facebook’s Libra, though interference by US regulators forced it quit.
Meanwhile, bitcoin surged more than 5 percent to over $12,400, the highest level since July 2019, taking its total gain since last week above $1,000.
The leading cryptocoin has continued to gain since its halving in May. Analysts believe the growth is a result of economic uncertainties created by the coronavirus pandemic, which has pushed investors into search for a secure place to hide their money. Gold has proved to be a place of refuge for investors, and recently cryptocurrency, though analysts said investors should be wary of its volatility.