Observations from the Fintech Snark Tank A new survey of 3,000 US consumers conducted by Cornerstone Advisors and FICO found that: 60% of smartphone owners have the PayPal app installed on their smartphone. 14% of PayPal users already own some form of cryptocurrency (in contrast to 8% of non-PayPal users). Of those PayPal users, 53% of them used Bitcoin to buy products or services in the past year, and two-thirds plan to in the next year or two. Another 15% of PayPal users intend to purchase or invest in cryptocurrency in the next 12 months—and half of them expect to make retail purchases with Bitcoin in the next year or two. $31.2 billion worth of retail products and services were purchased in the past year using cryptocurrencies by all Americans. PayPal users accounted for 74%—$23.1 billion—of that amount. Survey data is not very reliable, and I can't believe that 8% of non-PayPal users own cryptocurrency. But I wouldn't be surprised if half of smartphones have PayPal installed. Adding a Buy Bitcoin button to the app would overcome the friction that has long slowed adoption: buying from an institution that people already (wisely or not) trust with money. Robinhood is similar but may need more time to build their brand and reputation. I don't see any reason PayPal would ever have to touch cryptocurrency to support this service, other than to cover crypto gains. The press release says "all transactions will be settled with fiat currency at their current PayPal rates."PayPal’s Service is Going to Be a Big Hit
Crypto space is already replete with scams. Can you make any specific predictions about how things will play out at PayPal? It sounds to me like PayPal will offer their customers a virtual "wallet" with a bitcoin balance. Customers can convert funds between their dollar balance and their bitcoin balance, but they can't initiate bitcoin transactions with third parties or transfer bitcoin to their own address. If you buy something using bitcoin, PayPal just settles the transaction the usual way but debits your bitcoin balance at the current exchange rate. PayPal could do all this without ever touching actual cryptocurrency, but they would have to cover any big gains in bitcoin value. So they can just keep a pile of cryptocurrency in cold storage to hedge against volatility and simulate everyone's bitcoin balance. PayPal is already making income on the float; this is a smart way to get more people to store dollars with them.Cryptocurrency payments on PayPal will be settled using fiat currencies, such as the U.S. dollar, meaning merchants will not receive payments in virtual coins, the company said.