US global payment service giant PayPal has entered the realms of cryptocurrency as it has confirmed that it would allow its users to use Bitcoins on PayPal from early 2021.
There are more than 26 million merchants on the company’s vast payment network. Therefore, it should give Bitcoin more mainstream exposure and pave the way for other cryptocurrencies.
346 million PayPal users across the globe would now have the option to trade in Bitcoins and a select few major cryptocurrencies in the platform. The announcement came as a significant boost for the crypto world.
Despite its recent growth, cryptocurrency culture is yet to catch on as a universally trustable method of payment. Recognition from PayPal could come as a sort of exoneration for blockchain-based digital currencies.
However, there is a catch. You won’t be able to move cryptocurrencies through PayPal like fiat currencies. As of now, there is no option to relocate your digital assets.
So, what can you do? You will be allowed to keep your purchased Bitcoin on PayPal. That means PayPal would serve as a safe online wallet for the Bitcoin you buy from Bitcoin exchanges.
The company states its Bitcoin policy as below:
But, will these restrictions be relaxed in the future? Is there a possibility that you would be allowed to make cryptocurrency transactions and withdrawals at some point? PayPal remained tight-lipped on the matter.
The reactions from Bitcoin analysts have been mixed. Bitcoin wallet Trezor has publicly bashed PayPal for not giving users private key control and giving them true ownership.
In fact, in a blog post, the company explicitly asked users to refrain from using bitcoins. Trezor cited former PayPal CEO Bill Harris’s 2018 controversial Bitcoin comments and stressed that PayPal is not trustworthy.
Harris was ruthless in his assessment of Bitcoin and went on to label it as the ‘’greatest scam in human history’’. However, it is to be noted that Harris was not a part of PayPal when he had made those remarks.
Trezor branded PayPal as one of PayPal’s “greatest longterm adversaries”. It urged the Bitcoin community to prevent the likes of PayPal infiltrating the cryptocurrency network.
In terms of services, Bitcoin on PayPal at this moment almost mirrors the cryptocurrency features available on rival platform Square and stock trading app RobinHood.
Square is created by one of Silicon Valley’s brightest stars: Jack Dorsey. The Twitter co-founder and CEO have been one of the greatest advocates of cryptocurrency.
In 2019, Square allowed its users to withdraw Bitcoins. The chatter from RobinHood headquarters suggests that they would follow suit soon and green signal Bitcoin withdrawals.
Both of these companies have raked in millions from their cryptocurrency dealings. Many experts believe that this has prompted PayPal to claim a share in the cryptocurrency pie.
Fundamentally, Bitcoin on PayPal sounds conflicting to the “Be Your Own Bank” principle of the crypto. However, recognition from PayPal could prove to be a giant leap in Bitcoin breaking out of its niche.
Despite the concerns, the reaction to PayPal’s entrance in the Bitcoin regime has been generally well accepted. As a result, Bitcoin has hit record prices following the announcement (approaching $14,000 as of writing).
Experts have been somewhat anticipating PayPal’s approval of Bitcoin after the company left the Libra Association, which was set up to regulate the infamous digital currency introduced by Facebook.
PayPal’s push into the cryptocurrency market does not come as a surprise. But, some analysts believed the company would come up with its digital currency iteration. That seems unlikely in the current scenario.
The PayPal news broke among a host of other positive headlines for the cryptocurrency world like INX becoming the first SEC-registered IPO to deal in cryptocurrencies.
This signals a persistent growth in blockchain technology-based financial systems in the future. Many investors, corporations and financial entities have shown their faith in Bitcoin, and the trend seems here to stay.
In Which Countries Will It Work?
Unfortunately, Bitcoin on PayPal will not be immediately available to PayPal users all over the world. But, as of now, the United States is the only confirmed country where this functionality will be made available.
From early 2021, PayPal will add Bitcoin to its list of compatible currencies in the US market. The company plans to expand this feature in other countries.
But, that won’t happen without approvals from respective central bank authorities. Therefore, PayPal is in regular contact with financial policymakers of countries where it plans to launch this service.
Many governments are still cautious about cryptocurrency tradings, so we doubt that the Bitcoin feature will become available to PayPal users worldwide anytime soon.
What Other Cryptocurrencies Will You Be Able To Hold In PayPal Other Than Bitcoin?
Besides Bitcoin, PayPal will accept Litecoin, Bitcoin Cash, and Ethereum. Just in case you are not familiar with those, we have taken the time to create small profiles for each of those.
While Bitcoin is somewhat of a monopoly in the cryptocurrency world at the moment, Litecoin is one of its biggest competitions. Only Bitcoin and XRP have more circulation than Litecoin.
Litecoin has a fixed maximum circulation number of 84 million. That means, no more than 84 million Litecoins can be in circulation simultaneously. It generates a block every 2.5 minutes.
To put this into context, Bitcoin generates a block every 10 minutes. A block of a cryptocurrency is a digital record of all transactions made in that specific crypto.
So, the Litecoin network is capable of producing faster blocks, which facilitates faster transactions. On this regard, Litecoin has a clear edge over Bitcoin.
Unless there is a collusion between the vast majority of Litecoin users, it would be impossible for a single Litecoin to be spent twice. Falsifying the block data would not be feasible, since another miner will detect it instantly.
At the time of writing, 1 Litecoin was equivalent to $60.39.
Don’t let the name fool you-there are significant differences between Bitcoin and Bitcoin Cash. Bitcoin Cash is a digital currency that aims to address the biggest drawback of Bitcoin-slow transactions.
Blockchain could be the future of money, given its high level of security measures. But, it has to figure out how to process transactions faster to rival fiat money in a truer sense.
Global credit card operators Visa and Mastercard can oversee as much as 65,000 transactions on their systems per second whereas Bitcoin is only capable of facilitating seven per second.
In August 2017, Bitcoin Cash entered the fray to solve this problem. It offered the allure of a decentralised currency, but with a faster transaction rate. Sounds like the dream package, right?
But, in reality, Bitcoin Cash failed to maintain the security of standards of Bitcoin. The ease of transaction had poked holes in the system that gave rise to a handful of security vulnerabilities.
At the time of writing, 1 Bitcoin Cash amounted to $265.32.
Technically, Ethereum is the blockchain technology that fuels the digital currency ‘’Ether’’, but the name Ethereum has become somewhat interchangeable with the currency.
Ether was originally designed as a payment medium for the Ethereeum platform, but over time it has branched out, and now it is one of the most prominent cryptocurrencies around.
Just like other cryptocurrencies, you produce Ether by adding a block to the network. For Ether, you can do this within 3 seconds, which makes it outrageously fast, compared to other cryptocurrencies.
At the time of writing, 1 Ether went for $450.41.
How Can You Pay Using Bitcoin On Paypal?
While you can’t transfer Bitcoins to another user on PayPal, you can make payments using Bitcoin on PayPal. In that case, the amount of Bitcoin will be converted into a monetary equivalent.
Cryptocurrencies have gained notoriety because of their difficult to trace nature. This particular trait has made them particularly suitable for making illicit payments.
So, there is a lot of red tapes involved regarding Bitcoin transactions. The call for imposing stricter regulations on Bitcoin transactions is gaining more and more traction among lawmakers.
For this reason, PayPal will not authorise making Bitcoin payments to vendors for the time being. Conversion to fiat currencies makes it easier for regulatory bodies to keep tabs on transactions.
To facilitate Bitcoin payments, PayPal will work in tandem with the Paxos Trust Company. The American company had previously worked with Facebook’s Libra project.
However, Bitcoin-based payments are far from the norm outside the dark web. Privacy is usually the main concern for those who pay via Bitcoins. If anonymity goes out of the equation, Bitcoin trading will lose steam.
The common tendency for people is to hold Bitcoins, in expectation of future price rises. The cryptocurrency has recovered incredibly from its 2019 crash, and the prices have been soaring throughout this year.
American computer giants Dell is one of the big names that are planning to accept digital currencies as a form of payment over the coming decade, but people’s unwillingness to spend is hampering that transition.
At present, the Bitcoin market seems largely restrained to deep web transactions. The holders see it as too valuable of an asset to be used in conventional payments.
As we have detailed in the previous section, PayPal on Bitcoin is unlikely to make Bitcoin a more popular payment medium. Users and analysts still view it primarily as an investment.
Here’s what financial consultancy firm 11:FS co-founder Simon Taylor told Reuters about PayPal’s cryptocurrency ventures and how it would affect the market dynamics of Bitcoin.
“Robinhood and Square used bitcoin for the engagement. Then the question is, would someone want to use it for merchant transactions, which is more of an unknown.”
That said, PayPal can play an instrumental role in making Bitcoin a more trustworthy financial asset. We can foresee an increase in Bitcoin investment, because of its association with PayPal.
PayPal will give Bitcoin a foundation of credibility that many people failed to see in it. The widespread scepticism regarding cryptocurrency is already fading away, and PayPal can accelerate that process.
In fact, Bitcoin on Paypal will give all aspiring cryptocurrencies a much-needed dose of trustworthiness. If central banks decide to launch cryptocurrencies of their own, PayPal could be the ideal launching platform.
The European Central Bank is one of the central banks that are doing the groundworks to create their own digital currency. China is trialling digital yuan before a full-on release.
Ecuador was the first country to issue digital money when it introduced Sistema de Dinero Electrónico back in 2015. Economists are expecting a paradigm shift in federal digital currency trend over the coming years.
“I think this is more about PayPal being smart and looking to the future when fiat currencies will go digital,” digital currency consultant David Birch surmised.
Bitcoin can hope to tap into PayPal’s pool of clients and expand its user base substantially around the world. It will definitely raise Bitcoin’s already burgeoning stock to even higher levels.
This relationship will benefit PayPal as well, as the success stories of other Bitcoin wallets have led us to believe. PayPal stocks have already gotten up more than 5% after it put out the Bitcoin announcement.
Blockchain technology continues to get traction among global financial institutions. While cryptocurrency remains far from mainstream, it is safe to say that the trend is heading in the right direction.
Bitcoin on PayPal could prove to the cornerstone of the future cryptocurrency revolution. Using PayPal’s vast network, Bitcoins and other prominent cryptos can expect to bridge the gap with fiat counterparts.