“If you can’t beat them, join them.”
The cryptocurrency space is abuzz with PayPal, an Internet payment company that is making its way into the same industry as Bitcoin and Ethereum. Despite its resistance towards the decentralized payment system for years, the company has now decided to have a fair share of this new FinTech revolution, courtesy of the Cryptocurrencies Hub. PayPal is striving to be part of the blockchain and cryptocurrency industries, and it is part of the company’s plan to expand its business in such a strategic way.
For now, there is a lot of attention being paid to this new announcement from PayPal. Sure, it will revolutionize the crypto as a mode of payment. As we have mentioned before, we have a handful of ways to spend crypto at the moment, and given PayPal’s popularity, well, this could be the beginning of crypto finally going mainstream!
We are here to demystify PayPal’s debut in the crypto space and see if it is actually worth the hype. We will also get to the bottom of what it means to those of you who have invested your time, sweat, and money in various crypto wallets and exchanges, and how PayPal could benefit from this.
PayPal to boost cryptocurrency adoption
PayPal has just started exploring the world of cryptocurrency, and there is so much that we are yet to figure out. So, we will first try to understand the actual development. Towards the end of October 2020, PayPal briefly outlined its vision for a whole new service that will allow its users to purchase, hold, and sell several cryptocurrencies such as Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
The core strength of PayPal as a payment company is the number of global merchants (26 million) and users (346 million). Soon, PayPal wants to empower its merchants to accept Bitcoin as payment from its users. Starting with the U.S, PayPal users will be able to create a digital wallet to buy, hold, and sell crypto. Throughout 2021, PayPal’s focus will be on enabling the merchant aspect of this initiative.
Buy Bitcoins with PayPal
With currently estimated 70 million cryptocurrency holders globally, this is a huge deal. Now, something to keep in mind is that PayPal is coming into the crypto market very slowly and cautiously as they know that the U.S government specifically is not too thrilled about this news. In the next few weeks, users will be able to buy and sell cryptos with a $10,000 weekly buying cap (although there is a report that this limit has been extended to $15,000) and a $50,000 limit per 12-month period.
All crypto trades must be executed in USD, and users will not be able to deposit and withdraw their funds or send them to other PayPal individuals as of now.
With NOWPayments you accept crypto payments in crypto though! And they go straight to your wallet.
Things to consider before buying and selling crypto assets using PayPal
At first, there will be a lot of restrictions on who can buy crypto, how much you can buy, how you can spend those assets, so on and so forth. For starters, PayPal is not ready to provide customers with keys clarifying that they will own the cryptocurrency they buy on PayPal, but they will not be provided with a private key. PayPal will impose these restrictions to prevent losses.
Although you can hold, buy, and sell cryptos among other benefits, you will not be able to hold the crypto on your asset balance. On PayPal, all custody of and trading in crypto will be performed by Paxos.
You will be eligible for the use of PayPal’s Cryptocurrencies Hub only if you have a personal PayPal account and a Cash Account in good standing. The company has also made it clear that you can only use your Cryptocurrencies Hub as part of your Cash Account, and you can access the Cryptocurrencies Hub through your personal PayPal account.
PayPal will connect your Cryptocurrencies Hub to your personal PayPal account. Your account login credentials will act as the credentials to access PayPal’s Cryptocurrencies Hub.
Many of you may wonder if these limitations on PayPal as a crypto payment service defeats the purpose of crypto. You need to keep in mind that PayPal has much bigger plans to come up with a lot of new features slowly within the first and second quarters next year.
What is it that PayPal is looking to achieve?
In a nutshell, PayPal is just trying to make it easier to start accepting crypto payments. PayPal is looking to make money on a margin between the market price and the exchange rate between USD and crypto. PayPal will also charge you a fee when you buy or sell crypto assets.
The company will want to expand its crypto service into more parts of the world throughout the year 2021. This could also be a tactic to keep its users tied to its ecosystem and to prevent users from exploring other cryptocurrency wallets. PayPal is on the verge of bringing Bitcoin and other cryptos to the homepage of hundreds of millions of active PayPal users, nearly 5 times than those who continue to hold cryptocurrencies across various wallets and exchanges.
PayPal is also looking to acquire crypto firms to expand their embrace of crypto. According to reports, PayPal has been holding talks with BitGo, a company that allows investors to store Bitcoin and other cryptos securely. PayPal is expected to reach a potential deal with BitGo within weeks.
Is PayPal creating its digital currency?
Ever since PayPal announced its debut in crypto last month, the Reserve Rights Token (RSR) saw an almost 50 percent jump in its valuation. People are also speculating about the potential connection between PayPal and RSR due to a billionaire entrepreneur Peter Theil (who co-founded PayPal) being an investor in the RSR, which is fundamentally a stablecoin platform.
Reserve is essentially stablecoins which aims to reduce risk using diversification and decentralized governance, allowing users to buy, spend, and hold digital U.S dollars. PayPal is likely to take a similar route. PayPal doesn’t seem to have plans for some volatile Bitcoin-Esque instruments, to begin with.
PayPal’s primary goal has always been about facilitating payments between individuals online. The same holds for Bitcoin and crypto payments via PayPal. This is where Stablecoins could come into play. PayPal doesn’t probably want to rely on the Bitcoin blockchain to transfer value so that they could have instant transfers of sidechain stable coins.
PayPal will want to hold a significant amount of Bitcoin in its reserves, which should be enough to justify having Bitcoin transfer through its network.
Does PayPal want to monopolize the Bitcoin payment ecosystem?
Another thing PayPal could benefit from is putting Bitcoins into its network forever. Let’s talk about the concept of the bitcoin black hole. It is when Bitcoin goes into a network that it no longer comes out of. Financial institutions like PayPal could be working to create these types of black holes. Once PayPal puts Bitcoins into its network, those coins are off the market forever. They can be transacted within PayPal.
Unless PayPal adds a withdrawal function (which doesn’t seem to be the case so far), we have no reason to believe that Bitcoin will have any means of escaping PayPal’s ecosystem. Once a Bitcoin is part of the PayPal network (the Bitcoin black hole), it will effectively reduce the tradable supply on the exchanges.
NOWPayment is already facilitating Bitcoin crypto payments
While PayPal is launching its system to buy, spend, and hold Bitcoin and other cryptocurrencies, we already have a major alternative Bitcoin payment facilitator that steals PayPal’s thunder – NOWPayments.
NOWPayments enables accepting crypto payments online including e-commerce and social media websites. One of the best things with NOWPayments is that it doesn’t hold or store your funds (a black hole) in any way. It supports more than 50 cryptocurrencies and offers low transaction fees.
In addition to zero chargebacks, instant payments, lowest fees, and personal account manager, NOWPayments handles all Bitcoin crypto payments using four simple steps:
- Your customer chooses to pay with crypto.
- The customer selects a currency to pay with.
- The customer sends crypto to our deposit address.
- You receive the currency of your choice.
There is no denying the news about PayPal making inroads into the crypto space is positive since it will expose hundreds of millions of PayPal users to this new system. Again, it will provide hundreds of millions of users with crypto wallets and enabling instant and scalable transfers on the PayPal network.
The PayPal crypto development is positive for the cryptocurrency industry as a whole, and it very well could be that RSR is going to be in some way part of PayPal issuing its stablecoins. It remains to be seen how this strategy plays out ultimately.
Why use NOWPayments.io?
NOWPayments is the easiest way to accept online payments in a wide variety of cryptocurrencies. This service is custody-free, has competitive fees and is available worldwide.
- Over 50 cryptocurrencies are accepted on the platform with an in-built exchange feature;
- API, widgets, plugins and a donation button are all easy to integrate;
- It is a non-custodial service ensuring the security of your funds;
- A very simple setup