PayPal and Visa Embrace Crypto

Last Updated on April 7, 2021

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According to reports, both PayPal and Visa will be embracing cryptocurrencies, initializing programs that allow customers to issue transactions with their crypto wallets. Both companies will be moving forward with its plans very differently, but it is ultimately a giant leap for crypto believers, as larger corporations begin to see the promise and value cryptocurrencies hold.

Cryptocurrencies have primarily been an asset class that you buy, hold, and sell, as it increases or decreases in value based on the crypto market. Some, like Bitcoin, continue to hit milestones despite lacking immediate catalysts for its rise, and others, like Ripple’s XRP fall due to lawsuits or other extenuating circumstances. The crypto market has basically just been that- a market. Until now.

Visa and Crypto.com

In a pilot program with Crypto.com, Visa will settle payments on the Ethereum blockchain, a big turn-around for the company whose CEO previously disregarded crypto’s true value. In 2018, Visa Inc. CEO Alfred Kelly explained that cryptocurrencies aren’t a threat, and at the time, they weren’t. The total market cap of all cryptocurrencies was a little over $200B, while Visa itself was a $300B company. The upward trajectory was unexpected, but now the combined market cap of all cryptocurrencies is $1.8T and Visa is now $450B. While the company is also in an upward spin, the CEO has realized the full value that crypto can offer, and Visa is now taking positions to maximize that value for the company.

According to The Hustle, the program will work like this:

As of now, Crypto.com already offers Visa cards to its users, but any payments used by the cryptocurrency card have to be converted to fiat money first. This entails added costs to the merchants. Instead, the new process will have Visa settling any transactions made with the Crypto.com Visa card using Crypto.com’s USDx stablecoin. The stablecoin is pegged to the US dollar, which limits volatility.

One problem is that Ethereum charges a fee for operations on the blockchain. Such transactions can cost $10-$20. Visa will instead bundle the transactions to reduce costs and increase speeds.

Visa’s new program may just send crypto transactions into the mainstream. Cryptocurrency transactions are already more efficient than other currency transactions, as the transactions can be securely made from anywhere to anywhere.

Cryptocurrency Checkout With PayPal

PayPal currently works with over 29 million merchants around the world, and in its newest program, PayPal users will be able to hold certain cryptocurrencies and will be allowed to convert those holdings into fiat currencies at checkout- letting them make purchases with crypto.

Usually, merchants do not want to take on the risk of accepting cryptocurrencies due to its volatility. Fiat money is a lot more stable as it is a government-issued currency like the U.S. dollar, the euro, or other major global currencies, and won’t ascend or descend at the drop of a dime. If all merchants accepted any crypto at the point of sale, they would essentially be taking on enormous risks with every transaction. To solve for this issue and allow customers to make purchases with the crypto they already hold, PayPal has created a platform that allows users to use cryptocurrencies in the same way as credit or debit cards.

PayPal already allows users to buy, sell and hold cryptocurrencies on the app, but now the platform extends that service, converting certain holdings to fiat money at the point of sale. Merchants won’t take on the risk and volatility of the crypto, but users are more inclined to keep cryptos in their PayPal wallets and utilize it for merchant transactions.

This huge leap comes around the same time that Tesla announced that it would accept Bitcoin for purchases. The system PayPal has created ensures at least the mainstream cryptocurrencies, like Bitcoin (as of now it’s only bitcoin cash and Litecoin, according to Reuters) to enter into regular transactions. This could mean a wider acceptance of cryptocurrencies moving forward for larger corporations, while also making individuals more inclined to invest in the new form of currency, as the value continues to rise past speculation.