The news that PayPal, the payments giant with 325 million active user accounts worldwide, was considering the direct sale of crypto assets — along with custodial services — had the crypto community buzzing last week, even if the reports couldn’t be verified. On July 1, a PayPal representative told Cointelegraph: “PayPal does not comment on rumors or speculation.”
Guy Hirsch, the United States managing director of eToro, told Cointelegraph: “The importance of a global company like PayPal and Venmo getting into crypto is profound.” It will change the nature of cross-border transactions, which are now expensive and slow. Moreover, Hirsch added: “We’ll see more companies following the footsteps of Facebook, and now PayPal, to leverage crypto for cross-border payments, settlement and other use cases needed to optimize for a global economy.”
Sidharth Sogani, the founder and CEO of research firm Crebaco, told Cointelegraph: “The future of payments is in cryptocurrencies and P2P transaction settlements. Whether you like it or not, it’s here to stay,” adding: “PayPal has been the leader in simplifying online payments, and that’s the reason it recognizes the simplicity and capability of cryptocurrencies.”
So, does this mean that large traditional enterprises are now ready to embrace crypto payments? Maybe not, at least according to two recent research reports.
In a May 2020 report that was shared with Cointelegraph, Gartner, a research and advisory firm, warned the chief information officers of large companies to be “very careful toward claims that bitcoin and other cryptocurrencies could succeed as a medium of exchange,” adding:
“For all the promise of bitcoin and other cryptocurrencies, none of the largest online or traditional retailers accept them at scale. While bitcoin is used as a store of value, it has not become a medium of exchange for day-to-day commercial exchanges.”
The study questioned whether blockchain-based payments would really reduce fees to the extent claimed. In addition, “there is a lack of clarity around accounting and tax treatments, and most merchants are not able to handle the cryptocurrency exchange risks.”
A recent Credit Suisse report, meanwhile, predicted that “cryptocurrencies will be challenged to make a meaningful impact on the existing consumer payments (C2B) ecosystem over the near to medium term.” Problems cited were taxation issues, regulatory uncertainty and “lack of chargeback and dispute processes.”
Others agree that challenges remain. Nick Saponaro, a co-founder and the chief information officer of The Divi Project — a masternode solution — told Cointelegraph: “We need more solutions that facilitate B2B payments and invoicing before we see corporations adopting en masse.” In the U.S., the current tax treatment of cryptocurrencies makes them unattractive as a medium of commercial exchange. “You don’t have to pay capital gains on fiat accepted at your point of sale, and you shouldn’t have to do so with Bitcoin. For now, however, you do,” he said.
These obstacles can be overcome, though, according to Hirsch: “While there are local issues in every jurisdiction with taxes, regulations and risk management, the benefits outweigh the downsides.”
The current system is fragmented, inefficient
The allure of secure, frictionless, low-fee payment transactions remains. Gil Hildebrand, the CEO of Gilded — a financial services provider — told Cointelegraph that while the internet makes it easy to contact people: “Paying them and getting paid from them is still incredibly fragmented and inefficient. Crypto removes middlemen and makes payments cheaper, faster and more global.”
On the other hand, Saponaro said: “There are several large organizations accepting crypto as payment from customers,” enabling people to pay their phone bills and even taxes in some U.S. states. Bill Zielke, the chief marketing officer of BitPay — a Bitcoin payment-acquiring processor — told Cointelegraph: “We are seeing increased demand for crypto payment services.” According to him, transactions on BitPay were up 7.2% in Q1 2020 compared to Q4 2019, while volume increased 9.1% over the same period.
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