As part of one of the biggest cryptocurrency steps in 2020, PayPal decided to use Bitcoin alongside Ether, Bitcoin Cash and Litecoin.
PayPal is the largest institution that exists in the world when it comes to fintech companies and there is no other brand that is more synonymous with online payments. While PayPal only plans for now to allow its users to store value in Bitcoin and the three altcoins, it is likely that these integrations will grow and expand over time. For now, the biggest benefit of this PayPal move for Bitcoin may be the endorsement of one of the most reputable and trusted digital financial institutions.
PayPal hasn't always been a Bitcoin fan
PayPal's history with BTC is controversial. In the early days, many people wanted to trade BTC peer-to-peer with PayPal, but this proved to be difficult for a number of reasons. The main issue was that PayPal transactions are reversible, but bitcoin transactions are mostly final after one confirmation. This has led to a lot of scams involving Bitcoin trading on the PayPal platform. Rather than digging deep into the matter, PayPal has disabled a large number of Bitcoin users, basically making it clear that PayPal users are on their own in Bitcoin fraudulent trading situations. For a long period of time, the main way to trade between PayPal and Bitcoin has been a niche virtual currency exchange known as VirWox.
Regardless, there have also been signs over the years that PayPal may eventually accept Bitcoin and other cryptocurrencies. For example, Braintree, which is a subsidiary of PayPal, actually allowed Bitcoin payments back in 2015. Although these payments were not real bitcoin transactions as they could only be made through an account Coinbase.
You can even go back to 2014 and find a statement from the CEO of eBay, who still owned PayPal at the time, where he made it clear that the auction site is actively considering Bitcoin integration.
By 2016, it was becoming increasingly clear that PayPal would eventually launch some kind of cryptocurrency integration on its platform when Xapo CEO Vences Casares joined PayPal's board of directors.
After all, PayPal's biggest foray into the bitcoin market came in 2018 through a partnership with Coinbase where users could instantly withdraw dollars from their Coinbase account to their PayPal accounts.
Despite all of this Bitcoin-related activity over the years, PayPal's original CEO Bill Harris still called Bitcoin a scam back in 2018.
What happens next?
It should be clear that the Bitcoin integration currently being rolled out to PayPal users is quite limited. For now, PayPal users will only be able to convert their dollars into Bitcoin, Ether, Bitcoin Cash, or Litecoin. While this limited functionality is derided in some circles, the reality is that allowing over 300 million PayPal users to convert fiat to cryptocurrency at the click of a button is a big deal.
Of course, Bitcoin functionality in PayPal is pretty scarce right now, but the fintech giant has already made it clear that Bitcoin and other cryptocurrencies will be included as a source of funds for payments made through the PayPal platform in 2021. And it's unlikely that everything will end there. While PayPal users are unable to fully control their bitcoins today, it is likely that this is a short-term measure due to security concerns and potential regulatory issues. As these security and regulatory concerns will be resolved over time, it is likely that PayPal users and users of any other digital banking platform will be able to gain full control over their own Bitcoin private keys. This is simply a continuation of a trend where the worlds of cryptocurrency and fintech will merge over time. More cryptocurrency companies like Coinbase will look more like traditional fintech companies over time, and fintech institutions like PayPal and Square will also continue to integrate bitcoins and other cryptoassets more tightly into their apps.