Recently, the payment platform PayPal announced that it will launch a new virtual currency service, allowing users to hold and buy and sell virtual currencies. Also, it will allow users to use virtual currencies to settle purchases at 26 million merchants on the platform. Bitcoin, Ethereum, Bitcoin Cash and Litecoin will be supported in the PayPal digital wallet. PayPal expects US users to experience this feature in early 2021.
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PayPal has obtained the first conditional cryptocurrency license from the New York State Department of Financial Services. Affected by this news, Bitcoin rose in response, breaking through the $13,000 mark, setting a new high for the year.
PayPal’s Statement About Cryptocurrency
In PayPal’s statement, the most exciting thing for the capital market is the “shopping with virtual currency” function. Cryptocurrency tends to be volatile, and speculators have great interest. But it is much less attractive to merchants and shoppers. So its transaction speed is slower and more expensive than other mainstream payment systems.
PayPal also explained this in the statement. In order to avoid the risk of excessive fluctuations in the value of virtual currency, the so-called “virtual currency shopping” is essentially the function of first converting the virtual currency into legal currency, and then performing shopping settlement. In other word, the merchant will not receive payment in encrypted currency.
PayPal said that this service can realize real-time settlement. And it will not charge transaction fees, and merchants do not need to bear additional expenses.
Why Is PayPal Entering Cryptocurrency Field?
Regarding the above measures, Dan Shulman, PayPal President and CEO, said in an interview with the media that PayPal hopes that the service can promote the use of virtual currencies worldwide and provide a network for central banks and companies to develop new digital currencies.
Dan Schulman believes that the transfer of money to digital forms is inevitable and has obvious advantages in financial inclusion and access. Therefore, the payment system will be able to improve efficiency, speed and flexibility.
PayPal is not the world’s first financial technology company to support virtual currencies. The payment platform Square and retail broker Robinhood have previously supported virtual currency trading. But the company’s scale and opening up virtual currency shopping scenarios have made this feature arouse the attention of the capital market.
Public information shows that PayPal has 346 million active accounts worldwide. And the scale of payment transactions processed in the second quarter of this year reached $222 billion.
Su Xiaorui, a senior researcher at the Sack Research Institute, analyzed that PayPal’s move has both historical factors and practical considerations. In terms of historical factors, PayPal’s layout in the crypto field can be traced back to 2013. It has cooperated with the three major payment processors in the crypto field. In terms of practical considerations, there are two main reasons for PayPal’s entry into cryptocurrency. The first is to attract users. As an international payment giant, PayPal needs to adapt to the development of the digital economy and provide users with more convenient and efficient services in the digital age. The second is to resist external competition. As a giant, PayPal is naturally not to be left behind and is competing for users and regulatory uncertainty.
Since the beginning of this year, the giants have accelerated the pace of deploying Bitcoin. According to statistics from the Bitcoin Treasuries website, currently, more than $6.9 billion in Bitcoin is held by listed companies. This includes US software giant MicroStrategy, asset management companies Grayscale and Galaxy Digital, and Jack Dorsey’s mobile payment platform Square.
More and more cryptocurrencies are backed by hard assets. This seems to mean that the cryptocurrency market may be getting rid of the label of relative instability and turning to stable assets that can be relied on for a long time.
What Do Central Banks Think?
It is worth noting that some members of the G7 are also stepping up research on the central bank’s digital currency. At present, China’s RMB digital currency has entered the testing phase. And the “first shot” of digital currency has been fired in Shenzhen. Recently, the Bank of Japan also announced that it will strive to launch an empirical experiment on the central bank’s digital currency in fiscal 2021.
‘PayPal’s launch of a new virtual currency service is a market behavior, indicating that cryptocurrency may be accepted by market institutions. But it does not mean that it will be accepted by regulation.’ Su Xiaorui also mentioned that there are still many risks in cryptocurrency in payment, especially the risks in the field of anti-money laundering. For example, in May of this year, PayPal was investigated by the Australian financial regulator for possible money laundering transactions. The success of PayPal’s business development depends on the final attitude of the supervision. If the supervision is strongly involved, PayPal may still fall short.