Expert Takes: PayPal Launches Crypto Checkout Payments

Announcements, News, Opinion | March 31, 2021 By:

PayPal has started allowing its U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally, a move that could significantly boost use of digital assets in everyday commerce.

The payments giant announced Tuesday that the feature will initially be available with millions of PayPal merchants, with plans to add more in the months to come. PayPal was one of the first legacy institutions to integrate crypto support by letting its users buy, sell, and hold digital currency on their platform. According to the company, the new Checkout with Crypto feature provides an option to use it for purchases.

“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,” PayPal chief executive Dan Schulman said in a blog post. “Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.”

Viewed together with the announcement by Visa of testing payment settlements with a stablecoin, it appears that financial services incumbents are accelerating roadmaps for crypto in payments. With that in mind we have compiled some reactions from crypto industry experts on the significance of these developments.

Philippe Bekhazi, CEO of Stablehouse, said:

“Bitcoin and cryptocurrencies will benefit from greater accessibility following PayPal’s announcement. Market trends have confirmed Bitcoin’s status as a promising store of value so its dependence on payment systems is more muted than it would have been this time last year. That said, Visa and Paypal have led the way in cryptocurrency adoption and it is clear that most other payment providers will have to follow suit – the trend is only up from here. It should be noted, however, that as PayPal use their own rails to settle payments, smaller cryptocurrencies like Litecoin and Bitcoin Cash will be probably less impacted.””

Anubhav Girdhar, CEO and Co-Founder of Parcel, said:

“Apart from the significant boost in use of crypto payments in everyday commerce, this is absolutely huge in accelerating the adoption of crypto payroll as now pay cheques in crypto could be directly used to pay at millions of merchants worldwide.”

Patrick Campos, CSO at Securrency, said:

“This move by PayPal, coupled with Visa’s recent announcement of its new USDC-based service, will provide significant convenience for the millions of holders of cryptocurrencies, but it is still a far cry from establishing cryptocurrencies as true media of exchange. We view the offering of these new services by PayPal and Visa as a strong transitional development, but one that simply pushes the crypto-to-fiat settlement process further into the background.

In the near term, we view private stablecoins as the ideal fulcrum between the fiat and crypto worlds, one that is preferable to CBDCs for a number of important reasons, including privacy concerns and their superior ability to promote continued innovation in this space.

Certain crypto-assets are now well-established as stores of value and investable instruments, so facilitating payments against these holdings – particularly with the attractive spreads and fee opportunities that will exist in the near term – will drive more and more traditional payments players to offer these services.”

Masakazu ’Senshi’ Kikuchi, CEO of Secured Finance, said:

“PayPal provides the most wanted user-experience in the crypto space – payments. Removing the bottleneck of a fiat-to-crypto conversion changes the perception of crypto as a means of payment. People will be more comfortable receiving crypto as salaries and fees. It will create massive liquidity in e-commerce, which allows us to expect the volatility of crypto-assets to be reduced to an acceptable level.

Once crypto gets popular as a means of payment, we foresee more trading volume in stablecoins and will help the development of CBDCs. In the next few years, we see more payment service providers accepting crypto and other digital currencies, enabling a much broader use case of crypto in financial services such as loans and deposits.”

Amber Ghaddar, Co-founder of AllianceBlock, the world’s first globally compliant decentralized capital market, said: 

“Let’s call a spade a spade. PayPal is not allowing crypto payments. Instead, what they’re offering is a fiat gateway to crypto; meaning they will exchange your crypto for fiat and send the fiat to the sellers. This is not really revolutionary in any way. However, it is a step in the right direction. Right now it makes little sense to use crypto as payment. Most crypto — with the exception of stablecoins — behave like alternative assets with high volatility, high returns, and excess positive kurtosis. They do not behave like currencies, whose main role is stability. Who would sell their Tesla stock to buy a lamp on eBay? No one, they will hold to their stock if they can as they believe it will keep appreciating.

There is a difference between blockchain as technology and cryptocurrency as an application of this technology. Even the US Treasury recognizes blockchain as a powerful tool for real-time payments, as highlighted in their most recent FSOC report. Using blockchain technology and digitizing fiat currencies with CBDCs will allow for seamless payments in an industry with an infrastructure dating back to the ’60s. CBDCs are competitors to stablecoins but are in no way a threat to other crypto such as Bitcoin and Ethereum who have their own drivers, and which do not behave like currencies but more like alternative assets.”

Li Jun, Founder of Ontology, the high performance, public blockchain specializing in decentralized identity and data said: 

“PayPal’s decision to allow U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants is likely to encourage many to make their first crypto transaction – even if it’s just out of curiosity. While some may be apprehensive, once tried, it’s unlikely they will notice much difference between paying with crypto or legal tender. So, why not?

PayPal is the world’s largest payment company. So I think it’s likely that we are going to see a range of other payment providers following suit.

Now, the industry needs to focus on regulation and KYC. There is a need for digital payment methods to be combined with each individual user’s decentralized identity solution to truly break the barrier between traditional and crypto finance, and to ensure privacy and trust is upheld.”

Kurt Nielsen, Co-Founder and President of Partisia Blockchain, a Web 3.0 platform built for trust, transparency, and privacy, said: 

“This week’s developments from payment giants PayPal and Visa marks another milestone in bridging the worlds of crypto and fiat. Adopting crypto as a means of payment like this will undoubtedly increase awareness from central banks regarding the ability to effectively exercise monetary policy. However, the class of cryptocurrencies that more or less represents fiat money is of no threat and neither is the limited current total supply of cryptocurrencies. Assuming that central banks globally manage to collaborate when inflation starts, the real threat remains the lack of transparency in derivatives.

The blockchain ecosystem provides a new class of neutral infrastructure for the digital economy, and bringing cryptocurrencies into the hands of people globally is hard to underestimate. While cryptocurrency has been the most successful application of blockchain technology, the next generation of value creating features is piling up. In particular, the introduction of true decentralized privacy opens up the possibility of a new internet economy where users reclaim control of data and become real stakeholders. A key part of the interoperability offered by the Partisia Blockchain for example is the orchestration of interchain transactions that make payments independent of the coins used, also known as Bring Your Own Coin (BYOC), as opposed to introducing a new coin as a means of payment. This is mirrored in Visa and PayPal’s recent news where any user can now also use BYOC.”

Konstantin Richter, CEO and Founder of Blockdaemon commented: 

“It is a significant sign of progression in the market to see two global payments providers in Visa and PayPal announce crypto payments services this week. The dominant narrative on Bitcoin thus far this year has been around institutional adoption of the cryptocurrency, fuelled in large part by the perception of Bitcoin as digital gold.

Integration of crypto point of sale payments into the platform of a major financial incumbent like PayPal supports the narrative that the race among financial services firms for supremacy in crypto payment services is accelerating. In the immediate term the announcement is another major boon for the adoption of cryptocurrencies, with PayPay offering a straightforward fiat on-ramp to 325+ million users across the globe.”

[ON VISA NEWS] Antony Welfare, Executive Director, Enterprise at NEM Software commented:

“This is one more step in the revolution of the existing financial system. It is well documented how slow, cumbersome and expensive money transfer currently is, and even with the growth of Fintech challenger banks it is still difficult to send and receive currency. Visa using a stablecoin is a great interim step, but it still requires interfaces to the existing system and using the Ethereum network for settlement will incur high fees and slow transaction times.

That said, this is a great use case to show how a DLT can process stablecoin transactions. Once this testing moves to a hybrid platform (such as ETH2.0 and Symbol) we will see a more efficient use case with faster and cheaper transactions.  Ultimately, if we can link the work on CBDCs globally, with the work of the payment providers, and use the collective power of DLT networks, we will see a new financial system for the future: based on Peer to Peer payments, at speed, with low fees, and fully auditable.”