PayPal is now in the cryptocurrency business. The payments platform said Wednesday that, thanks to a new deal, users will be able to make and hold cryptocurrency transactions, as well as shop at the 26 million merchants in its ecosystem, starting early next year.
According to a statement, the company inked an agreement with cryptocurrency company Paxos on the new service, which will roll out in the U.S. first, with more markets to follow.
Cryptocurrency refers to a newer form of tech-driven virtual money based on the blockchain, a typically decentralized, digital form of cash that is nearly impossible to fake.
Shoppers will be able to spend their blockchain-based tender on goods, but that doesn’t mean PayPal will simply hand over the bitcoin, ethereum, bitcoin cash or litecoin to merchants as is. And that may relieve some retailers that aren’t yet up on these digital payments. Instead, the platform will complete the transactions using fiat currencies, so stores receive dollars, euros or other notes.
In the coming weeks, U.S. users will be able to use their PayPal wallets to buy, sell or hold cryptocurrencies. And next year, PayPal will extend the features to Venmo in some countries.
Interest in the digital money has been building for years, though its volatility has arguably held it back from driving more commerce. And even though transactions can be more cumbersome and expensive than other forms of payment, PayPal clearly believes that now is the right time to jump in.
“The migration toward digital payments and digital representations of value continues to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers,” according to a PayPal statement.
Dan Schulman, president and chief executive officer of PayPal, sees the crypto as the future of payments, calling it “inevitable,” as well as beneficial. It brings “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,” he said.
Now his company’s desire to get a piece of the action has become official.
According to Schulman, PayPal’s global reach, expertise in digital payments, technical and security chops can go a long way in helping legitimize and establish cryptocurrency. Although it’s been getting plenty of attention and even traction — both from rivals like Square to tech giants like Facebook and its Libra project, as well as to some of the top financial institutions in the world — it’s still considered an emerging innovation in a financial market where traditional currencies continue to dominate.
PayPal’s entry may or may not change that. But it doesn’t hurt. The company runs a massive platform that transacted some $222 billion in payments in the second quarter.