PayPal (PYPL 2.90%), the global leader in online payments, made headlines when it announced its entry into the cryptocurrency market in October 2020. That move was widely celebrated by the crypto community as a major step toward mainstream adoption. But just last week, PayPal took things a step further by integrating cryptocurrency payments and transfers into its popular Venmo mobile payment app.
The new integration will allow users to not only buy and sell cryptocurrencies and allow them to send crypto to other Venmo accounts, but brings added functionality to support transfers between wallets on different platforms and exchanges. Essentially, Venmo is now a one-stop shop for (almost) all of your crypto needs.
The downside is that only four cryptocurrencies are supported currently. Perhaps in the future, this will change, but as of today, the only cryptocurrencies you can move via Venmo are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
Still, this is a significant development that will have far-reaching implications for the crypto industry.
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The domino effect for crypto
First, PayPal's entry into the crypto space lends legitimacy to the industry. Many people are still hesitant to buy cryptocurrencies due to the perception that they are speculative investments with no real utility. However, a trusted and established player like PayPal offering cryptocurrency services could help shift that perception.
Secondly, PayPal's integration of cryptocurrency payments into Venmo will make it easier for people to use tokens for everyday transactions. Venmo has more than 75 million users, most of whom are millennials and Generation Z. Members of those demographics are more likely to use cryptocurrencies, and this Venmo update will make it easier for them to buy, sell, and hold them.
What's more, the change is likely to increase the acceptance of cryptocurrencies by merchants. PayPal's network is massive, with more than 29 million merchants across the globe and another 2 million using the Venmo app itself. By accepting cryptocurrency payments, merchants can avoid the high fees charged by traditional payment processors such as Visa and Mastercard. This could encourage more businesses to accept cryptocurrencies, which in turn would increase their adoption.
Little by little
According to a recent report from Beyond Market Insights, the global cryptocurrency economy is projected to reach more than $12 billion by 2030, and grow at a compound annual rate of 11.9% during the forecast period. The report highlights the growing adoption of cryptocurrencies in various sectors such as retail, travel, and tourism -- sectors where PayPal has considerable market share in payments already. Its entry into the crypto space and the expanding integration of cryptocurrency payments into Venmo will not only allow the company to capitalize on potential profits in this burgeoning space, but is likely to accelerate its growth even further.
Moreover, PayPal's move into the crypto space should spur other payment processors toward competitive moves of their own. For example, Block has been offering cryptocurrency services through its Cash App for some time now. The entry of PayPal into the market could lead to more innovation and unique crypto-based applications, which would inevitably result in better products and services for consumers.
A look back through crypto's short history shows that gradual adoption occurs through a series of events similar to PayPal's latest decision. Examples include investment firm Fidelity's move to offer crypto products to its clients in 2022 and popular brokerage Robinhood launching its own crypto trading functionality. Slowly but surely, these steps make crypto more accessible to the general public, and help it become more mainstream.
Fortunately, it's not too late for investors to benefit from this gradual adoption. There is still plenty of room for crypto to grow in the coming decades, and with most tokens still well below their all-time highs, investments in blue chip cryptocurrencies like Bitcoin or Ethereum could prove lucrative over the long term as the crypto industry continues to evolve and mature.
