During an earnings call with investors, the company confirmed the service will land first for US-based customers in early 2021 before expanding into other territories and integrating with the Venmo app by the end of the second quarter.
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Setting out his vision for the future of PayPal, CEO Dan Schulman described the project to overhaul the company’s digital wallet as a “fundamental transformation” that will change the way users interact with the service.
PayPal cryptocurrency wallet
One of the main criticisms levelled at cryptocurrencies is that genuine use cases are extremely limited; currently, crypto is more of an asset than a utility.
However, the ambition behind PayPal’s new digital wallet is to widen that pool of use cases drastically, lending greater legitimacy to the cult technology that has so far failed to overhaul the global payments ecosystem in a meaningful way.
“This solution will not involve any additional integrations, volatility risk or incremental transactions fees for either consumers or merchants, and will fundamentally bolster the utility of cryptocurrencies,” explained Schulman.
“This is just the beginning of the opportunities we see as we work hand in hand with regulators to accept new forms of digital currencies.”
Crucially, the new system will have no effect on PayPal’s 26 million merchants, who will still receive payment in fiat currency, irrespective of whether the customer has paid using crypto.
On top of handling processing and settlement, PayPal will act as a currency converter, switching cryptocurrency to dollars (and other currencies) based on the day’s rate.
The main caveat, however, is that PayPal will charge a relatively significant fee for transactions that involve converting cryptocurrency into fiat and vice versa. The firm will charge a 2.3% fee for transactions involving less than $100, falling to 1.5% for transactions worth $1,000 or more. There will also be a discrepancy between the price at which PayPal buys and sells cryptocurrencies.
Presumably, the measures are designed to offset risk shouldered by the firm relating to the volatility of cryptocurrencies. For example, if a user were to purchase ten dollars worth of goods in bitcoin, but the value of the cryptocurrency fell the following day, PayPal (as the intermediary) would find itself out of pocket by the margin of the fall.
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Joel Khalili is the News and Features Editor at TechRadar Pro, covering cybersecurity, data privacy, cloud, AI, blockchain, internet infrastructure, 5G, data storage and computing. He's responsible for curating our news content, as well as commissioning and producing features on the technologies that are transforming the way the world does business.