The global payments industry has been heading for a revolution but will yesterday's news also be pivotal for cryptos?
The market reaction to PayPal’s announcement on Bitcoin transactions is perhaps a reflection of a much bigger underlying story: the expectation that payments will be revolutionized.
It was 16 months ago that Facebook appeared to be the front runner to shake up the payments industry when it confirmed rumours that it would enter financial services with a digital currency payments solution based on a stablecoin, a cryptocurrency pegged to a stable asset.
However, the Libra project has faced challenge after challenge including regulators expressing their concern about the plan. As recently as last week the G7 group of nations that includes Canada, said that no stablecoin should begin operation until it adequately addresses relevant legal, regulatory, and oversight requirements through appropriate design and by adhering to applicable standards
PayPal, as an established leader in global payments with more than 300 million users across 200+ countries, was initially backing Libra but pulled out in October 2019. At the time it expressed support for the Facebook-backed plan but said it wanted to focus on its core business.
Earlier this year, Coindesk reported that PayPal was planning to join with the burgeoning Paxos Crypto Brokerage.
That report was confirmed this week as PayPal announced the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account. Paxos will enable the service in the US.
Beginning in early 2021, PayPal customers will be able to use their cryptocurrency holdings as a funding source to pay at PayPal's 26 million merchants around the globe. Consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees.
“Relics” must wake up to the inevitable shift
Dan Schulman, president and CEO, PayPal, said the shift to digital forms of currency was inevitable due to its “clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly.”
The CEO of global financial advisory deVere Group says that the PayPal news is validation that digital currencies are fast-moving into the mainstream.
And he said that “surely time is up for those relics who still believe cryptocurrencies are not the way forward?”
Green added that PayPal’s decision will drive more institutional investors to the crypto sector, bolstering it with their expertise and capital.
“Investor activity is picking up considerably with various on-chain metrics and ongoing – and heightening - global political, economic and social turbulence suggesting that there will be a price surge before the end of the year,” he continued.
New high on the way?
In 2017, Bitcoin surged to more than $20K, some way beyond the low teens reached Wednesday.
But Green believes there is plenty more gas in the tank.
“There’s a growing sense that we’re set to experience a mini-boom similar to that at the end of 2017,” he said. “Prices are yet to catch-up with investor interest – but this is only a matter of time as investors will not want to sleepwalk towards perhaps year-high prices in the run-up to the end of 2020.”
