PayPal has 2 decades of experience in online payments and manages 403 million user accounts. So, it caused ripples when it announced on 23 August it would allow UK customers to get and sell four cryptocurrencies: bitcoin prices rose to a three-month high. But will this – and last October’s roll-out in the US – push cryptocurrencies in to the mainstream, or could it be yet another blip in the short but volatile history of decentralised money?
Customers in america who have bought cryptocurrencies through Paypal sign in twice more frequently as those who haven’t, says Jose Fernandez da Ponte at PayPal. “We expect digital currencies to play a significant role in consumer payments over the long run,” he says.
Public interest in bitcoin and other cryptocurrencies is obviously growing, but only a minority have obtained in. A YouGov survey revealed that by August 2019, just 3 % of people in the united kingdom owned any cryptocurrencies. By July 2021 that had risen to 8 per cent.
Giving an incredible number of existing PayPal customers the ability to buy at the click of a button has enormous prospect of increasing those numbers, but usage of the currency isn’t the only limiting factor. People desire a way to spend it.
A small number of large companies, such as Microsoft, have begun accepting bitcoin as payment, and others such as electric car company Tesla did so sometimes too. And while several other retailers, including food markets, coffee shops and hardware stores, have systems to simply accept cryptocurrency in a few countries, only using this sort of payment day-to-day will be no easy task.
PayPal users in the UK won’t manage to use cryptocurrency to buy goods or services – they can only buy, hold and sell the currency. But in the US, the business offers the capability to use balances for payments anywhere that accepts PayPal. This effectively allows hundreds of thousands of retailers to simply accept cryptocurrencies without needing to make any changes or accept any risk, and receive US dollars from PayPal as normal.
Read more: Why have Elon Musk and Tesla suddenly turned against bitcoin?
That is vital, as the chance for businesses is high, says Carol Alexander at the University of Sussex, UK. Cryptocurrencies are “dominated by huge speculation and rampant manipulation”, she says.
Organised groups can cause swings in cryptocurrency values with coordinated selling or buying and, unlike the traditional financial services sector, there is little regulation to avoid it. So, invest the bitcoin as payment directly, it could plummet in value before you convert it.
“I can’t see this as as soon as crypto goes mainstream. The widespread market abuse needs addressing first,” says Alexander.
Cryptocurrencies are decentralised systems without official oversight, so regulation is difficult. Registered companies that deal in them have found themselves under increasing scrutiny. In June, the UK’s Financial Conduct Authority ruled that Binance Markets Limited, one of the world’s greatest cryptocurrency exchanges, had to cease regulated trading in the UK.
You may still find hurdles to overcome before cryptocurrency can truly break right into the mainstream, including its exorbitant energy use, volatility and complexity.
But some are still confident that the technology offers enough benefits, such as for example protection from inflation, a degree of anonymity and low service fees for large payments, that widespread adoption is inevitable.
Nigel Green at financial services firm deVere Group is confident that cryptocurrencies will replace traditional money and, although that moment continues to be a way off, he says PayPal’s announcement is “yet another example that exposes cryptocurrency deniers to be on the incorrect side of history”.
“That is a major step of progress towards the mass adoption of digital currencies,” he says. “A growing number of payment companies will naturally follow their lead.”
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