KEY POINTS

  • PayPal’s Bitcoin buy and sell service will be available to U.S. customers first
  • PayPal CEO said the shift to digital forms of currencies is inevitable
  • Bitcoin's price achieved its 2020 high because of the PayPal news

Online payments giant PayPal Holdings Inc has announced its plan to soon allow its users to buy Bitcoin and other cryptocurrencies on its Paypal and Venmo platforms.

PayPal has obtained a conditional cryptocurrency license from the New York State Department of Financial Services, enabling it to deal with cryptocurrencies such as Bitcoin and Ethereum. To offer the service, it partnered with Paxos Trust Company, a regulated cryptocurrency service provider, per Reuters.

PayPal Holdings said the service will be available to PayPal account holders in the U.S. in the coming weeks. After that, the company plans to expand the service to its Venmo mobile wallet and then to select countries in early 2021.

“Users will be able to learn about cryptocurrencies, track their prices, all without leaving the PayPal app,” the company stated in the updated FAQ about cryptocurrencies on its website. 

By 2021, when a user selects a cryptocurrency as a funding source on their PayPal account, that cryptocurrency will be instantly converted to fiat and the transaction will be settled in fiat currency. 

The cryptocurrency markets have reacted positively to the news, with Bitcoin climbing to as high as $13,250 before closing at $12,808. This is the highest daily closing price of Bitcoin for 2020.

PayPal assured users that there will be no transaction fees in buying and selling cryptocurrencies until 2021. There will also be no fees for holding cryptocurrencies in a user account. The company did say it will charge a spread (margin) between the market price it is receiving from Paxos, its trading service provider, and the exchange rate between the U.S. dollars and the cryptocurrency asset displayed to the user. 

In a blog post, PayPal said key problems of mainstream adoption of cryptocurrencies are volatility, cost, and speed of transaction. However, it acknowledged that digital currencies will soon go mainstream, citing a survey from the Bank for International Settlements that revealed many central banks are planning to launch their own digital currencies in the next three years. 

“The shift to digital forms of currencies is inevitable,” said Dan Schulman, president and CEO of PayPal. He added that the company’s global reach, security and compliance could facilitate in the understanding of these new exchange instruments.

PayPal was rumored to finally dabble in cryptocurrencies when last July it was reported that the company was working to integrate crypcocurrency abilities on its platform.

Reuters noted that other major companies are already dealing with cryptocurrency to fiat payments, but the PayPal news is noteworthy given its worldwide reach. PayPal has 346 million users and 26 million merchants worldwide, all of them will be exposed to cryptocurrencies once the company launches its buy and sell feature of cryptocurrency assets.

paypal A sign for Internet payment transaction portal PayPal stands outside the eBay Germany headquarters on Dec. 17, 2009 in Kleinmachnow, Germany. Photo: Sean Gallup/Getty Images