PayPal is no longer a crypto island.
The company announced on Tuesday (June 7) that people who hold cryptocurrencies in their PayPal account wallets will now be able to send and receive digital assets through external wallets and exchanges.
Until now, PayPal was a closed system, with customers only able to buy and sell crypto from PayPal itself and spend it only within PayPal’s 32 million merchant network.
See also: PayPal Scale Drives Crypto Utility
“This feature has consistently been rated by users as one of the most requested enhancements since we started offering crypto purchases on our platform,” said Jose Fernandez da Ponte, Senior Vice President and managing director of PayPal, blockchain, crypto and digital currencies. in the ad.
This step moves PayPal deeper into the realms of crypto payments and investments, as its customers are no longer locked into its ecosystem. PayPal only supports four cryptocurrencies: bitcoin (BTC), ether (ETH), bitcoin cash (BCH), and litecoin (LTC).
Access is now available to a limited number of PayPal users and will be rolling out to all US accounts in the coming weeks.
One of PayPal’s main contributions to using bitcoin and other digital assets as true monetary substitutes has been to accept it for purchases on its merchant network.
“Customers who transfer their crypto to PayPal can extend the usefulness of their crypto by spending using our Checkout with Crypto product at millions of merchants,” said Fernandez da Ponte.
By opening up to outside wallets, existing crypto owners who want to spend at these merchants don’t have to sell their bitcoin and redeem it on PayPal, which requires two transaction fees and, on the sell side, exchange fees.
Beyond that, transfers from one PayPal account to another are free, opening up exciting possibilities for payments within its borders. In February, PayPal started charging flat fees for crypto transactions, in addition to network fees.
Read more: PayPal and Venmo unveil new fees for crypto transactions
However, the lack of internal fees is a boon, especially within Bitcoin and Ethereum blockchains, where transaction fees paid directly to the network are high – usually several dollars. Additionally, crypto exchanges also charge fees of up to 2.5%.
These can add up very quickly, for both small and large transactions. As of June 7, the average transaction fee on the Bitcoin blockchain averaged $1.50 and has climbed above $10 over the past year. The average Ethereum transaction fee is $1.08 and has topped $10 and even $20 several times over the past year. They rise and fall based on trading volume, so it is cheaper to trade at certain times of the day.
So, for example, people who do business regularly could manage payments between PayPal accounts on a day-to-day basis, only moving their digital assets up and down at fixed intervals or at times when network fees are higher. down.
Similarly, sending crypto to a group of people would be cheaper for the sender by transferring it to PayPal and sending payments to each person’s PayPal account.
With 392 million users worldwide at the start of the year, PayPal’s very user-friendly interface has made it a comfortable starting point for people looking to test the crypto waters.
Previously, if a PayPal crypto owner wanted to expand their cryptocurrency business beyond the four tokens they support, the only way to do that would be to sell the bitcoins to PayPal and buy them back from an external portfolio.
While the company made no mention of adding more cryptocurrencies to the list of those it supports, Fernandez da Ponte said that PayPal will continue to add more crypto features in coming months. The company also announced that it will adopt additional personal identification data requirements to know your customer (KYC) anti-money laundering (AML) laws.
Additionally, PayPal said it received a full Bitlicense from the New York Department of Financial Services, upgraded from the conditional license it received in October 2020 by partnering with an existing licensee, the Custodian of CryptoPaxos.
The Bitlicense is by far the strictest certification required to do crypto business in any state in the United States, making it something of a regulatory gold standard. Many in the crypto community argue that this is too heavy a block to do business in New York. A good number of exchanges operating in the United States exclude New York residents.
PayPal said it was the first to receive a conditional Bitlicense and the first to successfully transition to a full license, which Fernandez da Ponte said signals “our commitment to responsible innovation and the expansion of the accessibility and usefulness of digital currencies while fully adhering to regulatory guidelines and best practices.”