[ad_1]
LONDON (Reuters) – PayPal Holdings Inc’s PYPL.O The decision to open its network to bitcoin and its rivals has been hailed by virtual currency enthusiasts as a watershed moment for cryptocurrencies and their path to becoming a popular means of payment.
But the move could do little to drag existing cryptocurrencies out of their payments niche, according to many fintech specialists, as holders of such coins often see them as a gold-like investment asset rather than a means of spending.
PayPal’s decision could, however, help the company attract new users in an increasingly competitive digital payments landscape where innovation reigns supreme, experts said.
It is also likely to prepare society for the advent of traditional digital currencies, such as those that could be developed by central banks, they added. Such coins are a world away from the bitcoin ethics, which sought to subvert the financial establishment by eliminating a central issuer or authority.
“I think this is more a fact about PayPal which is smart and looks to the future when fiat currencies go digital,” said David Birch, director of payments consulting Consult Hyperion. “I don’t think it makes much difference to bitcoin.”
PayPal said Wednesday that it will allow U.S. account holders to hold cryptocurrencies and shop with them at its 26 million merchants. The California-based company plans to expand the service to Venmo, its peer-to-peer payment app popular with younger consumers, within the first half of next year.
The company said it hopes the service will help cryptocurrencies become more useful as it prepares its network for the emergence of more traditional digital currencies.
The change makes PayPal one of the largest companies in the world to offer consumers access to cryptocurrencies and has pushed the price of bitcoin to its highest level in over a year.
“For ordinary people who have never heard of bitcoin, the association between PayPal and bitcoin, these are all signs that bitcoin is recognized as a digital asset that works,” said Lex Sokolin, global fintech co-head. at the blockchain software company ConsenSys.
But this association could benefit PayPal more than cryptocurrencies, other experts have suggested. In fact, the company’s shares rose more than 5% after its plans were revealed.
‘MORE THAN AN UNKNOWN’
Simon Taylor, co-founder and head of initiatives at fintech consulting firm 11: FS, said PayPal’s move would help attract and retain customer interest, or “user engagement.”
“Robinhood and Square used bitcoin for engagement. So the question is, would anyone want to use it for business transactions, which is more unknown.”
Square Inc SQ.N, the payments company led by Twitter chief Jack Dorsey, has been offering purchases and sales of cryptocurrencies in its increasingly popular P2P payment app Cash since 2018. Bitcoin revenue for Cash App increased 600% to $ 875 million in second quarter, compared to the previous year.
Online brokerage Robinhood Markets Inc has been offering cryptocurrency trading since 2018 and has seen a boom in business this year.
Through the move, PayPal is also expanding the suite of products within its portfolio, reflecting a winning strategy from Chinese rival Ant Financial, whose popular Alipay digital wallet includes services such as payments, loans and insurance.
“MARKET RELATED TO DARKNET”
PayPal’s vast network of merchants will likely make it more convenient for consumers to spend their cryptocurrencies. By making settlement via traditional or fiat currencies, it also allows traders to avoid exposure to volatility risk when accepting cryptocurrency payments.
The real question, however, is whether people will actually want to spend their cryptocurrencies, which are seen by many as a store of value, experts said.
Large companies of the computer manufacturer Dell Inc [DI.UL] to the travel site Expedia Group Inc EXPE.O have announced plans to accept digital assets over the past 10 years, but none have urged users to adopt cryptocurrency as a means of payment on a large scale.
“Nobody really wants to spend cryptocurrency,” said Michel Rauchs, author of several University of Cambridge studies on cryptocurrencies and blockchain. “Everyone wants to keep it to benefit from a potential price increase.”
This was echoed by industry analysts.
“If we look back at history, fundamentally bitcoin-specific payments haven’t taken off unless it’s a darknet-related market,” said Tim Swanson, head of market intelligence at blockchain software firm Clearmatics.
MAINSTREAM DIGITAL COINS
In the longer term, however, the move is likely to help position PayPal at the forefront of facilitating payments in more traditional digital currencies, such as those that could be developed by central banks and large corporations.
PayPal CEO Dan Schulman said before the launch that the company was working with the central bank’s digital currency regulators.
Major central banks around the world, including the European Central Bank, have accelerated research into issuing their own digital currencies, with the People’s Bank of China digital yuan project the most advanced.
The plans were spurred by the prospect of privately issued tokens such as Facebook FB.O Libra gains ample traction. PayPal was a founding member of Libra but dropped out after a few months.
Reportage by Anna Irrera and Tom Wilson in London; Editing by Rachel Armstrong and Pravin Char
.[ad_2]Source link
