PayPal Holdings Inc said on Thursday it will allow customers to hold bitcoin and other virtual coins in its online wallet and shop using cryptocurrencies at the 26 million merchants on its network. The new service makes PayPal one of the largest U.S. companies to provide consumers access to cryptocurrencies, which could help bitcoin and rival cryptocurrencies gain wider adoption as viable payment methods.
US account holders will be able to buy, sell and hold cryptocurrencies in their PayPal wallets over the coming weeks, the company said. PayPal plans to expand the service to its peer-to-peer payment app Venmo and some other countries in the first half of 2021. The ability to make payments with cryptocurrencies will be available from early next year, the company said.
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 size.
Bitcoin hit its highest since July 2019 on the news. It was last up 4.8 percent at $12,494, taking gains for the original and biggest cryptocurrency above 75 percent for the year. Cryptocurrency market players said the size of PayPal meant the move would be a plus for Bitcoin prices.
Bitcoin and other virtual coins have struggled to become established as widely used forms of payment despite being around for more than a decade. Cryptocurrencies’ volatility is attractive for speculators but poses risks for merchants and shoppers. Transactions are also slower and more costly than other mainstream payment systems.
PayPal believes its new system will address these issues as payments will be settled using traditional currencies, such as the US dollar. This means PayPal will be managing the risk of price fluctuations and merchants will receive payments in virtual coins.
PayPal’s service comes as some central banks have announced plans to develop digital versions of their currencies, following a Facebook-led cryptocurrency project Libra in 2019, which was met by strong regulatory pushback.
PayPal was among the founding members of this project but dropped out after a few months.
PayPal has secured the first conditional cryptocurrency license from the New York State Department of Financial Services. The company will initially allow purchases of Bitcoin and other cryptocurrencies called Ethereum, Bitcoin Cash, and Litecoin, it said. PayPal is teaming up with cryptocurrency firm Paxos Trust Company to offer the service.