PayPal Announces Bitcoin Support
by Jarred Walton on September 23, 2014 8:03 PM EST
It's been a long time in coming, but PayPal announced in a blog post today that they have partnered with BitPay, Coinbase, and GoCoin to allow merchants to accept Bitcoin. This comes just a few weeks after the announcement that businesses working with Braintree would be able to accept Bitcoin, and this is a more direct use of Bitcoin. The support will come via integration in the PayPal Payments Hub, and there is one significant catch: for now this is only supported for merchants in North America. Still, it's at least one small step towards further acceptance of virtual currencies. There are other qualifications to using Bitcoin with PayPal as well.
The blog notes, "To be clear, today’s news does not mean that PayPal has added Bitcoin as a currency in our digital wallet or that Bitcoin payments will be processed on our secure payments platform. PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop."
Interestingly, this comes at a time when the mining phase of Bitcoins and other virtual currencies has largely moved beyond GPUs and onto dedicated SHA256 and Scrypt ASICs. That's good news for gamers and graphics gurus like our own Ryan Smith, as it means we hopefully won't see quite as many GPUs that should be playing games sacrificed in pursuit of cryptocurrency mining. (And yes, I know there are many alt-coins that use other Proof of Work algorithms that haven't been ported to ASICs, but few if any are actually profitable to mine with GPUs at this point.) Scott Ellison of PayPal also notes that PayPal has worked with many merchants selling cryptocurrency mining hardware, but they do not work with pre-orders/pre-sales (i.e. early funding of hardware that has not yet shipped).
Today's announcement and the earlier Braintree announcement mark a clear change in tone from PayPal regarding Bitcoin, as the history of PayPal and Bitcoin has been a bit rocky up until now. Going back a few years, in the early days of Bitcoin PayPal actively took steps to prevent people from using their service to purchase Bitcoins. Others have reported bans from PayPal and closed accounts for dealing in Bitcoins. Obviously the inability to roll back purchases made via Bitcoin is a risk, and companies like Coinbase and BitPay now have services in place to mitigate some of the risks. Regardless, with sites like Newegg.com, TigerDirect.com, Overstock.com, and others all beginning to accept Bitcoin as a viable method of payment, it looks like PayPal has decided to join the club.
While there are still plenty of naysayers when it comes to Bitcoins and cryptocurrencies in general, this is great news for Bitcoin proponents as integration with PayPal opens the doors for thousands of small shops to begin working with Bitcoin.
Source: PayPal
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The Von Matrices - Tuesday, September 23, 2014 - link
This announcement of Paypal is not as significant as you make it out to be.All PayPal did is implement Coinbase/BitPay's API into their system. Any other business could have already done this directly without getting PayPal involved (Newegg is a good example of a customer already using BitPay's services directly). When PayPal is actually serious about Bitcoin, they'll process the payments themselves. That will be the groundbreaking announcement. For now, this is just a bunch of hype.
JarredWalton - Tuesday, September 23, 2014 - link
While it's true others could have used Coinbase or BitPay directly, this is actually quite a big deal in that PayPal used to ban anyone found to be buying/selling/giving away Bitcoins as part of a PayPal purchase. Also, there are tons of places that already work with PayPal that can now say, "Oh -- all I have to do is set things up to allow people to pay via Bitcoin? Gee, that's easy!" If you're looking to see Bitcoin gain acceptance, I'd say this is a major move in the right direction by PayPal.The Von Matrices - Wednesday, September 24, 2014 - link
The ability for sellers to quickly modify their stores to accept Bitcoin is surely a plus, but this announcement changes nothing in that PayPal still has no business model if Bitcoin adoption continues to increase. The company can't survive acting as a second middle man between the buyer and seller. PayPal needs to provides the Bitcoin exchange services directly (whether by buying one of the Bitcoin exchanges or by building their own exchange) to remain viable.mkozakewich - Wednesday, September 24, 2014 - link
There were a tremendous number of scams from people buying cryptocurrency with PayPal money and then reversing the transaction. There was just no way to deal with it easily.Some of the banning would have been about protectionism, but even today I'll bet accounts will be disabled for the sale of cryptocurrency. It's in their terms of agreement, I'm sure.
The Von Matrices - Sunday, September 28, 2014 - link
Also, PayPal does not allow any currency exchanges of any currency and never has. Bitcoin never has been treated specially in this regard; people just ignored the rules that existed before Bitcoin then cried hypocrisy when their accounts were suspended. The only ban regarded the selling of mining equipment, which was likely due to uncertainly about the legal issues, but since the laws have been clarified this ban has been repealed.ABR - Wednesday, September 24, 2014 - link
I'm not sure I'd characterize this as "great news for bitcoin proponents". Wasn't the original intention to create an _alternative_ to the existing ecosystem in which financial institutions occupy a privileged and parasitic (in the eyes of some) place? This is on the path to bitcoin just becoming a normal currency taxed, tracked, and regulated just like the other flavors of virtual numbers we move around electronically day by day. The only difference ultimately being the lack of a country name on it (who cares) and the inability too have physical pieces of paper and metal to use (though I'm sure this will come to if the demand does). Bitcoin is dead. Long live bitcoin!The Von Matrices - Wednesday, September 24, 2014 - link
I don't think this announcement is indicative of the future of Bitcoin by any means. PayPal choosing to accept Bitcoin is in a way fostering PayPal's own demise. The primary reason for PayPal introducing this service is because the number of sellers that know anything about Bitcoin let alone actually want to hold Bitcoin itself is minimal. Right now PayPal has a business model in that the company can tell sellers that they will get more buyers by accepting Bitcoin, and sellers are willing to pay PayPal to dissociate themselves from a payment method that they do not know much about.However, the side effect of PayPal introducing this service is that it increases awareness of Bitcoin and cause people to become familiar with the currency. Once sellers are comfortable with dealing in Bitcoin, they will realize that instead of paying 2.9% + $0.30 on every PayPal transaction they can accept Bitcoin directly, avoid chargebacks, and make the buyers pay the transaction fee (which is cheap anyway). This means that those sellers could either charge less for purchases in Bitcoin or pocket the money, but in either scenario there isn't an incentive for the sellers to promote PayPal's services. At this point PayPal has an uphill battle to convince buyers and sellers that their services are still worth the fees they add on top of the transaction, which I think will be a difficult case to justify and may ultimately result in the demise of PayPal.
ABR - Wednesday, September 24, 2014 - link
Besides performing the transactions, Paypal provides record keeping, mechanisms to mitigate the risk between unknown buyers and sellers, and convenience. None of these are either free or solved by bitcoin in itself. If Bitcoin becomes popular, Paypal might be able to adjust its business model and retain its dominant position, or perhaps competitors will step in. Maybe the removal of credit card companies as middlemen will incrementally reduce the fees, maybe 1% instead of 3, but there will still be profit-making around the exchange of funds. Bitcoin is just a first experiment though, and lessons learned may bring future versions that make the dream of middleman-free payments a reality.whyso - Wednesday, September 24, 2014 - link
Bitcoin is one of the worst ideas ever from a resource and environmental point of view. It may have good intentions but its mindlessly burning electricity. Government's need to step in and kill it with environmental taxes before it takes off. I'm not against the idea but the work done has to have some useful purpose.Homeles - Wednesday, September 24, 2014 - link
Thankfully, things like Curecoin aim to do something useful with all that number crunching. It's definitely wasteful in the meantime, though.