PayPal’s new service is a $ 50 billion stimulus for Bitcoin

OBSERVATIONS FROM THE FINTECH SNARK TANK

PayPal announced that it has obtained a conditional Bitlicense from the New York State Department of Financial Services (NYDFS). The license will allow PayPal to launch a new service that will allow its customers to:

1. Buy, hold and sell cryptocurrency (initially Bitcoin, Ethereum, Bitcoin Cash and Litecoin) directly within the PayPal digital wallet.
2. It uses cryptocurrencies as a source of funding for purchases from its 26 million merchants.

PayPal said there will be no service fees for buying or selling cryptocurrency until December 31, 2020 and no fees for holding cryptocurrency in a PayPal account.

According to the company’s press release:

“Consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and with no incremental fees. PayPal merchants will have no additions or fees, as all transactions will be settled in fiat currency at their PayPal rates. currents “.

PayPal will require users to keep purchased cryptocurrencies in their PayPal wallet without the ability to transfer them to other accounts.

The argument against PayPal

The PayPal news was met with some criticism from some parts of the cryptosphere. A blog post from Satoshi Labs said:

“Until recently, PayPal was anti-crypto. Writing in 2018, former CEO Bill Harris called Bitcoin` `the biggest scam ever, ” so what has changed? When a familiar brand like PayPal starts to selling Bitcoin, it’s probably not because it wants to spur healthy adoption. If millions of newcomers are pushed into Bitcoin by PayPal, there could be a serious information gap that jeopardizes their experience and undermines key principles of cryptocurrency. time after time, exchanges have lost user funds, often leaving them with no recourse. “

Blockchain.com CEO Peter Smith called PayPal’s plans “highly centralized and inflexible” and commented:

“Crypto is about financial freedom. It’s modern money that anyone, anywhere, can truly control. While we’re excited to see a new audience gain access, a custodial approach limits the opportunity to independently hold your cryptocurrency or carry out transactions freely “.

The counter argument

Satoshi Labs arguments are empty and devoid of merit:

• What has changed, Satoshi? CEO. Dan Schulman was named CEO of PayPal in September 2014, four years before Harris made his anti-Bitcoin comment.
• What is “healthy” adoption (and who made Satoshi Labs the arbiter of how consumers should adopt cryptocurrencies)?
• Satoshi Labs’ last point completely sinks his argument. It is exactly because exchanges have lost user funds that PayPal has the opportunity to provide these services (and provide them as it sees fit). The number of consumers who trust PayPal to keep their money far exceeds the number who trust crypto exchanges.

Furthermore, Smith’s claim is a contradiction. If PayPal users want to use the service as PayPal intends to offer it, they shouldn’t have the freedom make that decision yourself?

PayPal’s service is going to be a big hit

A new survey of 3,000 U.S. consumers by Cornerstone Advisors and FICO found that:

• 60% of smartphone owners have the PayPal app installed on their smartphone.
• 14% of PayPal users already own some form of cryptocurrency (unlike 8% of non-PayPal users). Of these PayPal users, 53% of them have used Bitcoin to purchase products or services in the past year, and two-thirds plan to do so in the next year or two.
• Another 15% of PayPal users plan to buy or invest in cryptocurrency in the next 12 months, and half of them plan to make retail purchases with Bitcoin in the next year or two.
• 31.2 billion dollars value of retail products and services have been purchased in the last year using cryptocurrencies by all Americans. PayPal users accounted for 74% – $ 23.1 billion – of that amount.

PayPal’s new service eliminates two barriers related to using cryptocurrencies for retail purchases: 1) Obtaining the cryptocurrency in a form usable for retail purchases and 2) Merchant acceptance of cryptocurrency as a form of payment.

As a result, retail payments made with Bitcoin, Ethereum and Litecoin by PayPal users could easily double and reach $ 50 billion by the end of 2021.

Will Square Counter?

PayPal’s new service is no surprise.

Coindesk reported on PayPal’s plan to launch a cryptocurrency buying service in the wake of Square’s announcement that generated $ 306 million in Bitcoin-related revenue in the first quarter of 2020, up from $ 65 million in the first quarter of 2019.

The surprise is in the details, in particular, allowing you to make purchases with cryptocurrencies and pay merchants in dollars. Will Square do the same?

Square concluded its recent $ 50 million purchase of Bitcoin in flourishing terms of “economic empowerment” and “financial inclusion,” but the real reason may be its intention to allow its Cash App users to transact retail in Bitcoin and pay traders in the currency of their choice.