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PayPal’s Crypto Adoption Draws Criticism and Support

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Oct 26, 2020
PayPal’s Crypto Adoption Draws Criticism and Support

Last week, the biggest news in the crypto space was the announcement by PayPal that it will soon be launching a crypto payment service and wallet. The mainstream payment giant also stated that it will launch the same features on Venmo, it’s subsidiary for mobile payments. In the past, the company had been considered a major hindrance in ensuring the widespread acceptance of crypto in the mainstream market. However, it seems that PayPal has changed its own stance and will play a prominent role in actually championing the cause of widespread crypto adoption. However, the company’s decision to enter the crypto industry has received opposing views regarding its future and impact in the space.

While the move has been endorsed by non-crypto players out there, traditional players in the crypto space haven’t been very supportive about it. The former include analysts at Morgan Stanley, who claimed that PayPal’s entry into the industry would encourage mainstream adoption of crypto. However, they did add that it will take some time before the company is able to improve its bottom line, after venturing into the market. It was noted by the analysts that PayPal will help in expanding crypto acceptance online. As of now, there are only 1% of the leading 500 internet retailers that accept crypto.

These numbers are too poor for an industry that has managed to undergo development of such magnitude. However, some people are speculating that PayPal’s move into the crypto market might be due to the company’s desire for staying competitive with its rival Square, rather than encouraging mainstream crypto adoption. While Morgan Stanley is supporting PayPal, others are less optimistic about the payment giant’s u-turn to enter the crypto space after opposing it for years. One of them is SatoshiLabs, which manufactures cryptocurrency hardware wallets. According to the company, PayPal is most likely going to offer custodial services.

As a former head at PayPal referred to Bitcoin as a scam, SatoshiLabs doesn’t believe that PayPal has decided to enter the crypto market in order to encourage its adoption. According to SatoshiLabs, offering custodial services means that people will not be able to have keys to their own crypto, which is a complete opposite of the principles on which crypto and Bitcoin operate. Third parties are eliminated with Bitcoin, while transactions are conducted in a decentralized platform. However, if PayPal takes on the custodial approach, these benefits being enjoyed by crypto investors and traders will be eliminated. 

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As per the report by SatoshiLabs, not relying on third-parties is part of the principles and ethos of cryptocurrency. While they insisted that the movement of coins will be restricted with PayPal’s entry, it also agreed that new users will be attracted to the market due to the regulatory status of the payment giant. A major problem for the crypto market is the refusal of banks to work with crypto-related businesses. However, this could change with the entry of PayPal in the market because banks will be forced to up their game to meet user demands.

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