PayPal previously announced it would enable merchants to accept cryptocurrencies for payment in March, and today went live with the solution for its 29 million merchants. However, for now, it’s only available for those with Paypal cryptocurrency holdings in the United States.
Last year PayPal enabled users to buy and hold certain cryptocurrencies in its wallet through an arrangement with Paxos. It was surprised by the level of demand and afterward commented that it added stickiness to the wallet as users regularly check the valuations.
“As the use of digital payments and digital currencies accelerates, the introduction of Checkout with Crypto continues our focus on driving mainstream adoption of cryptocurrencies, while continuing to offer PayPal customers choice and flexibility in the ways they can pay using the PayPal wallet,” said Dan Schulman, president and CEO, PayPal.
“Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.”
While it’s a big deal for PayPal, many cryptocurrency exchanges already offer Visa and Mastercard cards that allow users to pay using cryptocurrency. So it’s already been possible to pay with cryptocurrency at any outlet that accepts Visa or Mastercard.
For the retailer, purchases are converted into fiat currency and the retailer receives fiat currency in the usual way. That’s how it works for cards and PayPal.
PayPal says that it won’t charge fees, but instead there is a spread on the cryptocurrency. At the moment, Ethereum fees are very high, meaning spreads on Ether may be significant. Combined with the fact that conversion to fiat attracts tax, means this may not have a huge impact on cryptocurrency payments. The cryptocurrencies supported are Bitcoin, Litecoin, Ethereum or Bitcoin Cash.
However, once Ethereum fees stabilize and stablecoins or central bank digital currencies can be used, it becomes more interesting.
For example, yesterday Visa announced that a cryptocurrency exchange settled with Visa in the USDC stablecoin instead of US dollars.
Meanwhile, PayPal recently acquired cryptocurrency custody firm Curv for just under $200 million.