PayPal and Cryptos: The Moment We've All Been Waiting For
On Wednesday, PayPal announced plans to introduce cryptocurrency trading on PayPal and Venmo. Thanks to Paxos Trust Company, PayPal and cryptos now unite, opening a new horizon for crypto traders. This introduction will enable crypto traders to use cryptocurrency for more applications, even on a daily basis. This might make Bitcoin and other similar currencies more viable, accessible, and acceptable options for more people. The cryptocurrencies that PayPal supports include Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Although this is currently available in the US only, PayPal also announced future expansion into other countries, with more cryptocurrencies, in 2021.
Other financial technology companies, namely Square Inc and Robinhood Markets Inc., already allow their users to trade with cryptos. However, PayPal’s status as a global company carries significantly more weight for the cryptocurrency world. In response to this news, Bitcoin’s price shot up to its highest peak since July 2019. Specifically, it broke past $13,000 after starting this week around $11,760.
Joseph Edwards of Enigma Securities, a cryptocurrency brokerage in London noted:
“The price impact will be positive overall. There’s no comparison with regards to the potential exposure between the upside of PayPal offering this, and the upside of any similar previous offering.”
Basically, now that Paypal and cryptos are tied, Bitcoin and other cryptos have room to grow. This can only benefit investors, and it may also possibly help cryptos stabilize further with less volatility. What affects Bitcoin price is simply supply and demand. Now that there is a future for more widespread use for Bitcoin, Bitcoin’s price may rise and stabilize from new demand.
Why Did Businesses Usually Reject Cryptos?
Many people know that the first cryptocurrency ever successfully created is Bitcoin. Its introduction in 2009 with blockchain technology opened the door for many other forms of cryptos as well. But before PayPal and cryptos made headlines this week, not many businesses or financial institutions widely accepted cryptocurrency. Why is that?
To start, even though Bitcoin and other cryptocurrencies have been around for over a decade, its volatility proved risky for businesses and consumers. Although, as it becomes a more acceptable form of currency, its volatility is more likely to stabilize.
Secondly, transactions are also much slower and more expensive than traditional forms of payment. As a result, not many businesses accepted cryptos as a form of payment, creating a cycle that stunts cryptocurrency accessibility in the world. But, with PayPal and cryptos on their platforms, more businesses may be open to accepting cryptocurrencies. At some point, it may also be possible for exchange rates to mirror that of regular fiat currency as an afterthought for most consumers.
Finally, cryptocurrency also faces pushback on the user front: it is not something many people are comfortable with because it is too abstract of a concept. Cryptos are not government-issued money, nor are they a precious metal like gold or silver. In fact, many people seem to prefer a physical currency. But, seasoned investors seem to have more open minds for alternative financial instruments. Even while using a credit or debit card, people can still comprehend the idea that they are spending fiat currency. Now that cryptocurrency uses expand today, more and more people may make an effort to understand cryptocurrency.
How to Buy Crypto with Paypal
Mistrust often meets cryptocurrency because no government can regulate it. Since it is not able to be regulated, restrictions in place work against its common use, until now. To solve major issues of exchange time and fees, PayPal steps in with a new system, thanks to Paxos. This new system confronts the issue of regulation of volatility and exchange time and fees by incorporating traditional currencies. On top of that, PayPal will manage the volatility risk while businesses receive payment in cryptocurrency as consumers buy goods and services with cryptos. Most importantly, PayPal is the first company to receive the conditional cryptocurrency license from NY State’s Department of Financial Services. So, PayPal will start off its authorized process with Ethereum, Bitcoin, Bitcoin Cash, and Litecoin.
The fees involved with using cryptos and PayPal are based on the purchase/sale amount. Between $1.00 and $24.99 USD, the fee is only $0.50 USD. Percentages of the fees for using PayPal and cryptos vary as the amount increases.
- $25.00 to $100.00 USD = 2.30% of the purchase/sale amount
- $100.01 to $200.00 USD = 2.00% of the purchase/sale amount
- $200.01 to $1000.00 USD = 1.80% of the purchase/sale amount
- $1000.01 USD and above = 1.50% of the purchase/sale amount
What Is Paxos?
First thing on people’s minds might be, what is Paxos? Paxos Trust Company is a business that since 2012 works with the mission to “re-build the infrastructure of finance.” This pioneer seeks to put more power in the hands of the consumer and democratize access to a more fluid economic system.
Its major achievements include launching itBit exchange in Singapore, and then in 2015, the NY State Department of Financial Services bestowed them with a limited-purpose trust charter. This set up Paxos as the first company approved and regulated to provide cryptocurrency products and services. Because of this regulation and compliance, Paxos is a notable name in the blockchain industry that has built a reputation for trustworthiness for both institutions and the solitary investor. This credibility led to Paxos becoming the first to have a virtual currency conditional license from the NY State Department of Financial Services. Here is Paxos’ official comment from its blog:
One issue might remain for PayPal and cryptos: cryptocurrencies are not yet easy to liquidate. Because people have not been able to use cryptos in most big marketplaces, coin holders have not been able to use or sell it easily. While PayPal offers more use for cryptos, some might still be skeptical. Therefore, it is important to note that Paxos offers its own cryptocurrency: PAXG, another cryptocurrency that employs the blockchain system.
PAXG is a digital token that is a digital token symbolizing gold ownership. This token is actually completely backed by LBMA-accredited London Good Delivery gold, making it far less volatile than other cryptocurrencies. Additionally, you have the unique opportunity to trade it in for the physical safe-haven asset, with Alpha Bullion. Although this coin is not yet available on Paypal, there is room for it to move there in the future.