PayPal has two decades of online payments experience and manages 403 million user accounts. When it announced on August 23 that it would allow UK customers to buy and sell four cryptocurrencies, it is natural that it rocked the environment, pushing bitcoin higher in recent months. But will the weight of PayPal be enough to help the spread of cryptocurrencies in the mainstream market, or is it just a transitory effect?
Customers in the United States who bought cryptocurrencies through PayPal log in twice as often as those who didn’t, said Jose Fernandez da Ponte of PayPal. “We expect digital currencies to play an important role in long-term consumer payments.” Public interest in bitcoin and other cryptocurrencies is certainly growing, but only a minority have bought them. A YouGov survey revealed that as of August 2019, only 3% of people in the UK owned cryptocurrencies. By July 2021, it had risen to 8%.
Giving millions of existing PayPal customers the ability to shop with one click has huge potential for boosting those numbers, but access to currency isn’t the only limiting factor. People need a way to spend it. A handful of large companies, like Microsoft, have started accepting bitcoin as a payment, and others like electric car company Tesla have done so at times. And while many other retailers, including grocery stores, coffee shops, and hardware stores, have systems for accepting cryptocurrency in some countries, using just this form of payment on a daily basis is certainly not an easy task today.
But another vital element to reach this milestone is the stability of cryptocurrencies, currently very low as they are not linked to state reserves of any kind. At the moment, therefore, accepting bitcoin payments for companies is a high risk, as also explained by Carol Alexander of the University of Sussex, in the United Kingdom, according to which cryptocurrencies are currently “dominated by enormous speculation and rampant manipulation”. Organized groups are in fact capable of causing swings in cryptocurrency values with coordinated purchases or sales and, unlike the traditional financial services sector, there is little regulation to stop it. So, if you accept bitcoin as a direct payment, it may devalue before converting it back.
Cryptocurrencies are decentralized systems without official supervision, so regulation is difficult. The registered companies that deal with them are under increasing scrutiny. In June, the UK’s Financial Conduct Authority ruled that Binance Markets Limited, one of the largest cryptocurrency exchanges in the world, was to cease regulated trading in the UK. There are still hurdles to overcome before cryptocurrency can truly enter the mainstream, including its exorbitant power consumption, volatility and complexity.
But some are still confident that the technology offers enough benefits, such as inflation protection, some degree of anonymity, and low fees for large payments, so they believe widespread adoption is inevitable sooner or later. Nigel Green of financial services firm deVere Group is confident cryptocurrencies will replace traditional money and, while that time is still a long way off, says PayPal’s announcement is “another example that cryptocurrency deniers are on the wrong side of history. “.