Cryptocurrency has had quite an interesting year. After a tremendous boom in the first few months of 2021, a notable crash in cryptocurrency prices occurred. Amidst concerns about regulatory changes involving digital coin and heavy energy use for cryptocurrency mining, investors became spooked. But after reaching its nadir in mid-May, it has since begun to rebound. In fact, Bitcoin’s value recently exceeded $50,000, reflecting a 4 percent increase since May. But the change of investors’ heart didn’t result from changes in energy consumption of digital coin regulation. Instead, it resulted from a major announcement regarding PayPal and cryptocurrency overall.
(Go deeper on why cryptocurrency mining is bad for the climate in this Bold story.)
PayPal recently announced its expansion into the UK financial markets. In the U.S., PayPal and cryptocurrency trades have been available for nearly a year. But PayPal has been hesitant to expand into other foreign markets with its cryptocurrency transactions and offerings. This now appears to have changed, indicating a growing acceptance of digital coin use among foreign financial institutions. The news had a significant impact on cryptocurrency markets, especially among digital coins that PayPal will cover in the UK. And it suggests a tipping point for cryptocurrency transactions may soon be upon us.
“We think that we’re going to be helping the cryptocurrency ecosystem develop further in the U.K. In the U.S., we knew there was high demand for this service. we’ve launched, we’ve seen incredible and sustained engagement from our users. Consumers who buy, hold and sell cryptocurrency on our platform in the U.S. log on at 2x their previous rate.” – Public statement by PayPal
PayPal and Cryptocurrency in the UK
As an overview, PayPal will now allow residents in the UK to buy, hold, and sell cryptocurrency using their PayPal accounts. Customers can purchase specific cryptocurrencies through a bank or by using their debit cards. These digital coins include only Bitcoin, Ethereum, Litecoin, and Bitcoin Cash currently. In addition, PayPal has set limits in the UK for cryptocurrency transactions. The maximum transaction amount will be set at £15,000 with an annual limit of £35,000. This is notable different than in the U.S. where no annual limits exist, and weekly limits total $100,000. Regardless, PayPal and cryptocurrency experts expect the UK launch to trigger a significant increase in digital coin transactions.
To compare, PayPal announced the ability to buy, hold, and sell cryptocurrency in the U.S> last fall. Partnering with Paxos Trust Company, PayPal was able to integrate systems into its fintech platforms to accommodate these activities. Since then, PayPal has seen the number of cryptocurrency transactions more than double. Given that the company makes money from customers buying and selling cryptocurrency, the move has been quite lucrative. Plus, PayPal added cryptocurrency transactions to its Venmo app last November. The success generated from these moves prompted PayPal to expand to the UK. This seems like a logical move since the UK is PayPal’s second largest market and a major fintech hub globally.
“The pandemic has accelerated digital change and innovation across all aspects of our lives — including the digitization of money and greater consumer adoption of digital financial services.” – Jose Fernandez da Ponte, VP and General Manager of Blockchain, Crypto and Digital Currencies at PayPal
The Vision for PayPal and Cryptocurrency
Beside the limits on cryptocurrency transactions in the UK, there is one other notable difference in comparison to the U.S. PayPal will not be enabling e-commerce checkouts at this time using digital coin. In the U.S., PayPal introduced its “Checkout with Crypto” platform where users can convert cryptocurrency to pay for online purchases. In this instance, PayPal simply converts digital coin to USD for a transaction fee. Businesses then receive compensation in U.S. dollars. Given that PayPal has over 29 million business members, this has the potential for a tremendous impact. But these PayPal and cryptocurrency options are only available in the U.S. at this time.
Of course, that doesn’t mean things won’t change in the near future. Both PayPal and cryptocurrency analysts appreciate the value such a platform can offer. By streamlining cryptocurrency transactions via e-commerce, it’s likely more and more consumers will test out digital coin. In addition, because online businesses aren’t penalized for these cryptocurrency transactions, they’ll gladly support them. This is particularly true given the challenges businesses face in managing digital coin transactions themselves. In essence, PayPal and cryptocurrency conversions provide a needed service to these e-commerce sites. By all accounts, PayPal’s expansion into commercial cryptocurrency transactions looks to be a win-win for all.
“Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.” – Dan Schulman, President and CEO, PayPal
Laying the Groundwork for the Future
The recent expansion into the UK is just one of many moves that PayPal is making in terms of digital coin. Several recent events have been reported involving PayPal and cryptocurrency businesses. PayPal’s venture capital arm, for example, has invested in a number of companies involved in cryptocurrency transactions. This includes investments in TRM Labs, which handles cryptocurrency safety concerns using risk management software. (Is crypto really safe? Read this Bold story to find out.) It also involves funding for Talos, a digital asset trading infrastructure firm. And it also pertains to investments in TaxBit, a cryptocurrency tax software system. All of these activities show how PayPal in heavily invested in digital coin’s future.
Most experts anticipate that PayPal will introduce commercial cryptocurrency transactions in the UK in a short amount of time. Likewise, they also expect that other countries and markets may soon be the target for PayPal and cryptocurrency decisions. If the UK experiment goes well, not only will this encourage PayPal to move forward with its digital coin expansions. It will also help financial institutions move toward a digital economy. For these reasons, it looks like a tipping point in the acceptance of digital coin may be around the corner. And PayPal is more than happy it seems to be leading the charge.
