Robert Steinadler, 6 months ago
Ever since PayPal announced in 2020 to open up to cryptocurrencies it became clear that the whole market would change. Only recently the e-commerce and payment giant made another announcement that is once again of high importance, only this time a lot fewer heads got turned. One reason for the market not reacting was that we are in full bear mode since the beginning of this year and investors have lowered their expectations.
In this case, we deal with fundamental news that may have a huge impact on how the crypto space is going to develop in the future.
PayPal started offering crypto trading in 2020 for US customers who completed a know-your-customer verification. The company partnered with Paxos and is offering only a few selected cryptos. Among them are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
It was last year when PayPal announced that it would extend its offer to the UK and allow customers to trade crypto as well. For more than 3 years it was rumored that the company would take this step and open up to crypto. The reason why it took so long was the fact that a payment processor of the size of PayPal needs a clear regulatory environment. Once all conditions were met the company adapted to crypto.
With only one big exception.
When trading started in the US customers could buy, sell and hold the aforementioned cryptocurrencies. But they were only allowed to do so within the ecosystem of PayPal. Which meant that transfers from and to other external wallets were excluded. Even transfers between PayPal wallets weren’t possible.
There was a lot of criticism that this would turn PayPal into a second-layer network with limited features. Some people even feared that PayPal could create Bitcoins out of thin and put them on the balance sheet of their customers who have no way to check the actual funds. This was of course FUD since in partnership with Paxos the company was legally required to buy BTC and all other cryptos in accordance with the amount that was held by its customers.
But those critics don’t have to worry any longer because PayPal announced this week that all wallets would be opened for transfer. This means that US customers enjoy a full-blown custody service and can now interact with Bitcoin, Ethereum, Litecoin, and the Bitcoin Cash blockchain. They can also send their crypto to other PayPal wallets internally without paying any network fees.
PayPal has a little bit more than 377 million customers worldwide. It is only a matter of time until the company will roll out crypto to all of its customers. This means that even people who are prone to getting into new technology are most likely to face the option to interact with crypto one way or another.
It is easy to see how this could potentially change the world. For now, US customers had to sell their crypto internally in PayPal to then spend it when shopping. With the current change, PayPal becomes a full wallet solution and also allows direct payment using cryptos.
All that it needs to spark a crypto revolution are more people joining the party and a regulatory setup that acknowledges crypto as currency rather than a commodity to make it easier to use it for payments tax-wise. Especially many Bitcoiners do believe that PayPal is one of the intermediaries that needs to be eliminated. But it seems that this intermediary could potentially play one of the most important roles in the global mass adoption of Bitcoin and all other cryptocurrencies.
The lightning network may be permissionless, open, and public. But PayPal could turn out to be the more available second-layer solution that makes payments using crypto as easy as shopping with a credit card. History has proven time and time again that often not the best technical solution is going to win the race but the one that is more available to the masses and easier to adopt. PayPal only requires to install an app and will not need their customers to get in touch with technical specifications.
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