PayPal to Cooperate With Bitcoin

September 24, 2014 7:03 pm Last Updated: September 24, 2014 7:19 pm

No, you won’t be able to select “pay with bitcoin,” when you pay for your next eBay item with PayPal.

However, the announcement of electronic payment provider PayPal to let merchants handle Bitcoin through its Payments Hub is big news and another step towards full market acceptance of bitcoin.

“We’re fierce advocates of giving businesses, and in turn their customers, flexibility and the freedom of choice,” Scott Ellison, a PayPal director, wrote on the company’s blog. 

This freedom of choice will now include bitcoins. Merchants already handle credit cards, mobile payments and other methods through Payments Hub. They will now also be able to handle bitcoin if a customer approaches them with bitcoin technology from the companies BitPay, Coinbase and GoCoin. The initiative will be limited to North America.

“We believe digital goods merchants will be excited to work with these industry-leading companies to sell ringtones, games and music and get paid with bitcoin,” wrote Ellis.

Earlier in September, the company’s Braintree unit said it was developing a system to enable its clients like Uber and Airbnb to accept bitcoin payments.

No Consumer Link Yet

“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,” writes Ellis. 

This means there will not be a consumer link yet, i.e. if you buy something with PayPal you will have to stick with your credit card and bank account, at least for now.

PayPal is using a step-by-step approach to integrate bitcoin into its system. The most important first step has been taken and there is no reason why there shouldn’t be a consumer link in the medium term future.

Apple Pay

Some analysts think the PayPal move has to do with Apple’s recent foray into mobile payments. 

“Apple’s announcement is just another data point. As an established payments processor, PayPal can’t afford to be left behind if any of these new schemes take off,” Roger Kay, tech analyst and founder of Endpoint Technologies Associates Inc. told Marketwatch.

However, PayPal had been working on this deal for months, as executives of the bitcoin companies told CoinDesk.com.

“When we were working with PayPal, it wasn’t ‘What’s square one?’ It was a team that understood bitcoin, and recognized the potential benefits as well as risks,” Coinbase director Adam White told CoinDesk.com.

Apple so far has not commented on its plans with bitcoin and whether it will be available on Apple Pay, which is starting next month. With PayPal having made the first move, Apple could take the next step and enable a bitcoin consumer link.