PayPal users will soon be allowed to buy and sell cryptocurrencies in the US. PayPal has tied up with a cryptocurrency company Paxos to launch the new service. Paxos will take care of trading and custody. Paypal aims to bring the service to more countries soon.
Initially, PayPal plans to support Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. Users will be able to connect to their PayPal account to buy and sell cryptocurrencies.
To carry on with the new service PayPal has been granted a conditional BitLicense by the New York State Department of Financial Service.
The company’s service is rolling out progressively. Users can head over to PayPal’s website and join the waitlist. Almost everyone will be allowed to access crypto-related features within the next month or so.
Cryptocurrencies are usually volatile, making them attractive, but do not appeal much to merchants and shoppers. To date, cryptocurrencies have remained a niche payment method and are only popular among some types of investors.
By early 2021, PayPal aims at letting users use their crypto assets as a funding source for PayPal purchases. This would likely become the best way to use cryptocurrencies for everyday purchases without getting cryptocurrencies converted on an exchange first.
About 26 million merchants offer PayPal globally and for them, customers paying in crypto won’t have any impact.
Cryptocurrency payments and transactions on PayPal will be settled using fiat currencies, such as the US dollar, thus merchants will not receive payments in virtual coins, the company said.
The company has already updated its fees with details about cryptocurrency exchange fees. It will charge high fees on fiat-to-cryptocurrency and cryptocurrency-to-fiat exchange transactions. Users will need to pay 2.3 percent for transactions below USD 100, 2 percent for transactions between USD 100 and USD 200, 1.8 percent for transactions between USD 200 and USD 1,000, and 1.5 percent for transactions above USD 1,000. There’s a minimum fee of USD 0.50 for transactions below USD 25. The company also says there will be some spread between buying and selling prices. However, the fees will be waived until 2021.
Another firm Coinbase charges 1.49 percent in conversion fees for any transaction over USD 200, and a fixed fee below that amount. Buying crypto assets with a debit card is much more expensive, as Coinbase charges 3.99 percent.
Other firms, already offering cryptocurrencies for sale are Square’s Cash app and Revolut. Robinhood hides its fees behind some markup on market prices and Square’s Cash App charges a variable fee. PayPal consists of one of the largest merchant networks in the world.
Revolut also has a tie-up with Paxos in the US to offer cryptocurrency trading, charges 2.5 to 3 percent in exchange fees for free customers. If you’re a premium user, you pay 1.5 percent in fees.
PayPal on making users understand cryptocurrency said, “We are aiming to increase consumer understanding and adoption of cryptocurrency. We will also provide account holders with educational content to help them understand the cryptocurrency ecosystem.”