PayPal Launches Checkout With Crypto to Let Users Pay in Bitcoin and Convert to Fiat for Merchants

PayPal will allow users to pay in cryptocurrencies like bitcoin and ether at millions of merchants in the U.S. starting today, according to an announcement from the company on Tuesday.

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Called “Checkout With Crypto,” the new service will let anyone holding crypto through PayPal actually pay using crypto and PayPal will convert it to fiat currency for the business that’s accepting the payment.

PayPal launched the ability to buy cryptocurrencies through the platform in October but this is the first time users will be able to buy things with it. PayPal, which included a YouTube video in its announcement, says it will not charge a transaction fee.

The service is only available to U.S. users as of Tuesday but will be expanded “over the coming months,” according to a PayPal spokesperson.

As PayPal explains the new system:

At checkout, if a customer has sufficient balance of cryptocurrency to cover an eligible purchase, crypto will automatically display as a payment method for that purchase.
Customers will be able select their cryptocurrency of choice – Bitcoin, Litecoin, Ethereum or Bitcoin Cash, depending on what they are holding with PayPal and the balances available in each cryptocurrency. Only one type of cryptocurrency can be used for each purchase.
Once the customer confirms the purchase, the cryptocurrency is converted to fiat currency by PayPal on the customer’s behalf and the transaction is completed. The customer will receive a record of both the crypto sale, as well as the purchased item.
PayPal charges no transaction fee to checkout with crypto – a cryptocurrency conversion spread will be built into the conversion from crypto to USD.
The news, first reported by Reuters, will likely spur plenty of headlines about cryptocurrencies as the future of buying things online, but there are still plenty of hurdles for currencies like bitcoin and ether to become mainstream. The largest problem is volatility, of course. Who wants to actually spend bitcoin if the price is expected to rise in the near term? Spending it is basically like throwing money away.

Tesla, which recently announced it will accept bitcoin for purchases of cars in the U.S., fixed the volatility problem on its end by deciding to list prices in fiat, despite the fact that it’s accepting bitcoin as payment. That’s certainly one way to do things, but it shouldn’t give much confidence that crypto will replace the U.S. dollar anytime soon.

But crypto doesn’t need to necessarily replace fiat to become a profitable player in the market. And PayPal seems to understand that as it races head-first into the world of bitcoin payments.

“As the use of digital payments and digital currencies accelerates, the introduction of Checkout with Crypto continues our focus on driving mainstream adoption of cryptocurrencies, while continuing to offer PayPal customers choice and flexibility in the ways they can pay using the PayPal wallet,” said Dan Schulman, president and CEO of PayPal, said in a statement on Tuesday.

“Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.” © Evan Agostini/AP PayPal President and CEO Dan Schulman. Evan Agostini/AP
PayPal told Reuters that it was now letting US consumers use cryptocurrency holdings to pay online.
Customers can use bitcoin, ether, bitcoin cash, or litecoin in their PayPal digital wallets to pay merchants.
CEO Dan Schulman told Fast Company he made the first cryptocurrency purchase, buying a pair of cowboy boots.
See more stories on Insider's business page.
PayPal has started allowing US consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally, it announced Tuesday.

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Customers who hold bitcoin, ether, bitcoin cash, and litecoin in PayPal digital wallets would now be able to convert their holdings into fiat currencies at checkouts to make purchases, the company told Reuters.

President and CEO Dan Schulman told Fast Company he made the first official purchase using the new checkout system, buying a pair of cowboy boots.

The service, which PayPal revealed it was working on late last year, started rolling out on Tuesday, and would be available to all US customers "over the next few weeks," Schulman said.

Customers can already use it at half of PayPal's 29 million merchants across the world, he added.

"This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet," Schulman told Reuters.

Read more: PayPal is seeing high engagement numbers from crypto holders on its app as digital currency is shaping up to be a key part of the payment giant's future strategy

Checkout with Crypto builds on the ability for PayPal users to buy, sell, and hold cryptocurrencies, which the San Jose, California-based payments company launched in October.

The offering made PayPal one of the largest mainstream financial companies to open its network to cryptocurrencies and helped fuel a rally in virtual coin prices.

Bitcoin has nearly doubled in value since the start of this year, boosted by increased interest from larger financial firms that are betting on greater adoption and see it as a hedge against inflation.

PayPal's launch comes less than a week after Tesla said it would start accepting bitcoin payments for its cars. Unlike PayPal transactions, where merchants will be receiving fiat currency, Tesla said it will hold the bitcoin used as payment.

Still, while the nascent asset is gaining traction among mainstream investors, it has yet to become a widespread form of payment, due in part to its continued volatility.

PayPal hopes its service can change that, as by settling the transaction in fiat currency, merchants will not take on the volatility risk.

"We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants," Schulman told Reuters.

The company said it would charge no transaction fee to checkout with crypto and only one type of coin could be used for each purchase.

LONDON (Reuters) - PayPal Holdings Inc will announce later on Tuesday that it has started allowing U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally, a move that could significantly boost use of digital assets in everyday commerce.

Customers who hold bitcoin, ether, bitcoin cash and litecoin in PayPal digital wallets will now be able to convert their holdings into fiat currencies at checkouts to make purchases, the company said.

The service, which PayPal revealed it was working on late last year, will be available at all of its 29 million merchants in the coming months, the company said.

"This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet," President and CEO Dan Schulman told Reuters ahead of a formal announcement.

Checkout with Crypto builds on the ability for PayPal users to buy, sell and hold cryptocurrencies, which the San Jose, California-based payments company launched in October.

The offering made PayPal one of the largest mainstream financial companies to open its network to cryptocurrencies and helped fuel a rally in virtual coin prices.

Bitcoin has nearly doubled in value since the start of this year, boosted by increased interest from larger financial firms that are betting on greater adoption and see it as a hedge against inflation.

PayPal's launch comes less than a week after Tesla Inc said it would start accepting bitcoin payments for its cars. Unlike PayPal transactions where merchants will be receiving fiat currency, Tesla said it will hold the bitcoin used as payment.

Still, while the nascent asset is gaining traction among mainstream investors, it has yet to become a widespread form of payment, due in part to its continued volatility.

PayPal hopes its service can change that, as by settling the transaction in fiat currency, merchants will not take on the volatility risk.

Story continues

"We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants," Schulman said.

The company will charge no transaction fee to checkout with crypto and only one type of coin can be used for each purchase, it said.

(Reporting by Anna Irrera; Editing by Susan Fenton)