PayPal announced Wednesday that it will soon begin letting users buy cryptocurrency within its app. The news was hailed as transformative by advocates of decentralized currencies such as Bitcoin.
Bitcoin continued a strong upward trend on the news, reaching annual highs above $12,400. Cryptocurrencies available to PayPal users will include Ether, Bitcoin Cash, and Litecoin, in addition to Bitcoin. Those currencies also saw sharp rallies this morning.
PayPal joins Square and Robinhood among mainstream consumer services offering cryptocurrency purchases. Square’s Cash App allows users to buy Bitcoin, though not other cryptocurrencies. Robinhood offers a wider array of digital assets through its stock trading app.
One of the primary appeals of cryptocurrency is that, much like paper currency, it allows an owner to receive, hold, and send money without the involvement of a payments processor, bank, or other third party. But PayPal’s cryptocurrency service, at least at first, will be effectively limited to purchasing currencies through a third party, Paxos Crypto Brokerage, which will actually hold the private cryptographic keys controlling the crypto tokens. PayPal help documents also state that it will not be possible to send cryptocurrency from PayPal either to other PayPal accounts or to a user’s own cryptocurrency wallet outside of PayPal.
The use of third parties to store and secure cryptocurrency is widespread and considered a user-friendly alternative to self-custody, which can be risky and technically challenging.
Despite this compromise, cryptocurrency advocates greeted the news as a watershed moment because it will increase public awareness and the perceived legitimacy of blockchain-based digital currencies. PayPal has a reported 346 million users worldwide and processed $222 billion in payments in the second quarter of 2020.
Mike Novogratz, founder of the cryptocurrency-focused investment fund Galaxy Digital, described the announcement on Twitter as “the biggest news of the year in crypto.”
Crypto purchases will be available to PayPal users in the United States within weeks, according to Reuters. PayPal plans to expand the offering to other countries starting in 2021.