PayPal & Crypto… It’s almost time to buy crypto with PayPal!
PayPal’s digital wallet announcement has sent shockwaves through the tech and cryptocurrency industries. The news sent Bitcoin’s price up 5% on the day. However, PayPal’s move is just one of many as a part of PayPal’s long-term strategy on cryptocurrency. The strategy became public in 2014 and has had some surprises that some people don’t know about or even realize to this day.
That’s why we made this article- to give you the complete history of PayPal and cryptocurrency- and breakdown that long-term strategy that one of the world’s largest payment processors has been planning for more than a half of a decade.
This PayPal crypto article discusses:
- Every major crypto milestone and announcement PayPal has made since 2016 (including links to press releases and other statistics that aren’t easy to find);
- News and information about partnerships in the industry that PayPal has had over the years;
- The story of a PayPal board director who also serves as a leader in the crypto community;
- PayPal’s overarching mission for crypto from day one to now.
As you know, PayPal has announced that it will allow its customers to hold Bitcoin and other digital currencies in a PayPal digital wallet. Customers can then use the crypto at over 26 million merchants on PayPal’s network.
(Restrictions do apply. At first PayPal’s digital wallet will be limited to US PayPal customers, however, whether they can use the crypto with merchants internationally on PayPal is not clear at this time).
There was news of even more additional features coming in the next year. PayPal also announced that Venmo is on deck to get a digital wallet! The Venmo digital wallet in addition to a global rollout of the PayPal digital wallet will be available by the first half of 2021.
Of course, PayPal owns Venmo but they have different purposes. Venmo was created for peer-to-peer transactions (sounds like Bitcoin) such as paying your friends for a meal or chipping in on a birthday present for a coworker. PayPal, on the other, hand is for peer to peer transactions as well as buying goods and services from merchants.
By this time next year, both applications should have fully functioning digital wallets!
History of PayPal and Crypto
The news of PayPal’s crypto announcement sparked joy across the world. It catapulted Bitcoin to over USD$13K, a price point that hasn’t been touched since the great bull run of 2017-2018. Yet, this isn’t PayPal’s first splash in the world of cryptocurrency. Rather, the news is a very likely move that most people probably saw coming given PayPal’s initial mission of being a payment disruptor.
PayPal, Crypto and Coinbase: PayPal’s Trial Run with Crypto
As many of you know, PayPal has had a long-standing relationship with Coinbase since 2014. If you have a Coinbase account, you probably know you can withdraw crypto instantly into your PayPal account. Until September 2020, PayPal was the only instant option for Coinbase withdrawals as the other bank options required a waiting period from one to several days.
In a way, PayPal had a monopoly over a small corner of the market– instant withdrawals. If you needed your crypto liquidated in a hurry, and you weren’t afraid to pay absorbent fees to do so, you were able to use the Coinbase and PayPal combination.
At the same time that the PayPal and Coinbase announcement was made in 2014, PayPal also publicly announced it had partnerships with BitPay and Gocoin. The announcement made it clear that these third-party providers would be taking on the custodial risk, and that Bitcoin wouldn’t be held in a PayPal wallet. These early partnerships dipped PayPal’s toes in the proverbial pool of Bitcoin without actually taking on the risk associated with it.
In many ways, 2014-2020 can be thought of as PayPal’s trial run with crypto. However, six years later, the announcement has come full circle. PayPal is now installing a digital wallet onto their platform for US users. The future payment disruptor is coming to life like Frankenstein.
PayPal Has Been Long On Bitcoin For a Long Time
PayPal’s gradual Bitcoin adoption is very evident of a slow, multi-phase strategy that has been in place for at least 7 years in the making. To further the point of PayPal’s gradual crypto adoption strategy, in 2014 PayPal’s Senior Director of Corporate Strategy, Scott Ellison, talked about PayPal’s approach candidly.
“PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop.”
“PayPal also needs to follow the laws and regulations in every market we operate. For this reason, virtual currency exchangers and administrators interested in working with PayPal in the future must secure the appropriate licenses and put anti-money laundering procedures in place.” – PayPal’s Scott Ellison (The Next Web, 2014).
This quote just demonstrates a long history of hesitation but eventual execution for PayPal and crypto.
Crypto Executive Added to Board of Directors
Then in 2016, PayPal made a move that even further proved the company’s interest in cryptocurrency. It brought on Xapo CEO Wences Casares onto its board. The Hong-Kong based cold storage provider executive was brought onto the board because his vision for the future of eCommerce was symbiotically aligned with PayPal’s vision. Both business models want to build the future for the movement and management of money for people everywhere.
Despite the addition to its board over four years ago, PayPal and Xapo never formalized a partnership.
PayPal Crypto and Facebook’s Libra
PayPal also made headlines during its short-lived tenure with Facebook’s Libra project. It joined the non-profit organization of 28 companies to oversee Facebook’s crypto creation and eventual rollout. However, PayPal backed out of the Libra in October 2019. Less than ten weeks later, PayPal posted 8 blockchain engineering jobs for a blockchain research group; four in California, four in Singapore.
There were other companies involved with Libra at the time who were equally as short-lived. Still to this day, Facebook’s regulatory issues are at the top of people’s minds so that was a concern that only grew worse in the last year. Also, when the announcement for Libra was first made, President Trump said the project made him “very uncomfortable.” Some of those projects in the Libra Association have gone on to start their own crypto projects, others have distanced themselves from the technology altogether.
Is Bitcoin the New PayPal?
Bitcoin is like the new PayPal, or perhaps more so it fulfils the original mission of what PayPal once stood for. According to a 2017 article from VentureBeat, PayPal’s original mission was to be “the new world currency.” However, as the article points out, the eBay acquisition dampened that goal. Yet, PayPal has remained a background force in the market. Meanwhile, Bitcoin continued to disrupt the international monetary system by being a new type of currency that is less centralized and intertwined with the current financial establishment.
It only made sense for PayPal to decide to join in on this mission given its original purpose- to be the new world currency. It has come full circle in the official announcement that PayPal will have a digital wallet, a statement released in October 2020.
However, despite a joyous response by markets, other crypto enthusiasts are less excited about the announcement given PayPal’s power it has over the market, a muscle it’s not afraid to flex. Like in November 2019 when PayPal shut out 100,000 model accounts on PornHub. Thank God for the Cash App.
Some Less Excited About the PayPal Crypto Announcement
Other people are less excited about the fees that PayPal charges. Currently, there is a 2.9% transaction fee plus a fixed fee based on the currency. Additionally, anyone outside of the USA pays a fee of 4.4% on top of the transaction amount plus the fixed currency fee as opposed to the 2.9% domestic rate. People are only starting to imagine what these fees will look like for cryptocurrency.
Yet, these fees are not without warrant. The argument goes that PayPal makes it accessible for people to send and receive payments to anyone anywhere in the world, but so does Bitcoin.
Benefits of PayPal Having Crypto
In the second quarter of 2020, there were over 346 million active users on PayPal. Although that number is smaller for only the US users that will be eligible to use the cryptocurrency services PayPal is rolling out, that number is still phenomenal. That is a user base with nearly the same number of people as the USA’s total population.
Having access to a sliver of these users means that PayPal will be onboarding potentially millions of new people to crypto for the first time. It would be interesting to see how many of PayPal’s pre-existing users own crypto or plan on buying it in the next 12 months.
PayPal Crypto for the Bankless Powered by Walmart
PayPal also has an extensive collaboration with Walmart in the United States. Walmart and PayPal operate almost like a bank for many working-class Americans. At over 4,000 of Walmart’s USA-based stores, PayPal users can either deposit or withdraw up to USD$500 daily into/ from their PayPal account. That means if you want to fund your PayPal account with some cash and use that cash for crypto, you can just hop in the car and go to your closest Walmart. And they are everywhere in the states.
In other words, PayPal may be offering a very quick way for users to go from cash to crypto in nearly every neighbourhood across America.
However, arguably the most important feature of the Walmart in PayPal partnership is that people can get cryptocurrency without a bank account. Using PayPal and Walmart together, users can just deposit cash into a PayPal account that is not tied to an account and routing number. In other words, the PayPal cryptocurrency announcement is almost PayPal‘s way of returning PayPal back to its roots.
Remember what CNN closed out its 2014 article by saying, the move (referring to adding the early crypto partnerships), is a return back to PayPal’s roots of being a payment disruptor. Imagine what the same writer would think of the most recent step PayPal took.
Questions remain: How much of PayPal’s Capital Reserves will be allocated to Bitcoin? Will they follow the likes of Square and MicroStrategy, or will they put even more money where their mouth is? Either way you look at it, the outflow from USD continues.
Frequently Asked Questions:
What cryptocurrencies can you buy using PayPal?
The company said they will begin by rolling out options to buy four different cryptocurrencies. Those coins include Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
These are standard options that are available at nearly every single cryptocurrency exchange or wallet service across the globe. However, the fact that PayPal is offering this service to a preexisting audience that isn’t necessarily exposed to Bitcoin could be game-changing for the industry. The news and markets have responded accordingly.
When there is a higher volume of social media engagement about Bitcoin, a price surge is typically looming. Afterall, some argue that the largest correlation between Bitcoin’s price going up is how much it is mentioned on social media, as published by Frontiers in Physics.
Where can I buy crypto with PayPal?
As of now, there are few places where you can buy crypto with PayPal. Some exchanges do allow you to cash out in PayPal, but to deposit using PayPal is much rarer. However, as of October 2020, PayPal officially announced that there will be a PayPal crypto wallet. The wallet will allow its millions of users in the USA to use cryptocurrency as a payment option at one of PayPal’s millions of vendors.
Can I buy crypto with PayPal?
At the current time, you cannot buy crypto on the PayPal platform. However, within the next few months, PayPal, as well as Venmo, will be rolling out crypto payment options across the USA. We will keep you updated on this blog with the most current information as it becomes available.