Is PayPal’s crypto move a game-changer for bitcoin? Probably not, say experts

Technology News

Anna Irrera

Tom Wilson

LONDON (Reuters) – PayPal Holdings Inc’s decision to open its network to bitcoin and its rivals was hailed by virtual coin enthusiasts as a watershed moment for cryptocurrencies and their path towards becoming a widespread means of payment.

But the move might do little to drag existing cryptocurrencies out of their niche in payments, according to many fintech specialists, as holders of such coins often view them as an investment asset akin to gold rather than as a means of spending.

PayPal’s decision could, however, help the company attract new users in an increasingly competitive digital payments landscape where innovation is king, the experts said.

It is also likely to prepare the company for the advent of mainstream digital coins, like those that could be developed by central banks, they added. Such coins are a world away from the ethos of bitcoin, which sought to subvert the financial establishment by doing away with a central issuer or authority.

“I think this is more about PayPal being smart and looking to the future when fiat currencies will go digital,” said David Birch, a director at payments consultancy Consult Hyperion. “I don’t think it makes much difference for bitcoin.”

PayPal said on Wednesday it would allow U.S. account holders to hold cryptocurrencies and shop with them at its 26 million merchants. The California-based company plans to expand the service to Venmo, its peer-to-peer payment app popular with younger consumers, by the first half of next year.

The company said it hoped the service would help cryptocurrencies become more useful, while readying its network for the emergence of more mainstream digital coins.

The shift makes PayPal one of the largest companies globally to give consumers access to cryptocurrencies and sent bitcoin’s price soaring to its highest level in over a year.

“For regular people that have never heard of bitcoin, the association between PayPal and bitcoin, those are all signals for bitcoin being recognised as a digital asset that works,” said Lex Sokolin, global fintech co-head at blockchain software company ConsenSys.

But that association might benefit PayPal more…