On October 21, 2020, PayPal Holdings, Inc. announced the launch of a new service enabling its customers to buy, hold, and sell cryptocurrency directly from their PayPal account. The initial roll-out, which should happen in the “coming weeks,” would permit U.S. PayPal customers to hold Bitcoin, Ethereum, Bitcoin Cash, and Litecoin directly within the PayPal digital wallet. PayPal also announced that it has received a conditional New York BitLicense and that it is partnering with Paxos Trust Company. PayPal also indicated that it would make the cryptocurrency available as a funding source for purchases at its 26 million merchants worldwide next year. It hopes to extend the service to Venmo and international payments in 2021.
In the wake of the announcement, many cryptocurrencies increased in value; BTC rose by more than 15%. It will be interesting to see if this increase will be sustained or disappear into the volatile noise of BTC.
LEGAL TOKENS
Most crypto aficionados know that the IRS views cryptocurrencies as property, meaning that every time someone buys or sells cryptocurrency (or uses cryptocurrency to purchase something) there is a taxable transaction which will require gains or losses to be tracked. But will casual or novice users be blindsided by this? PayPal’s announcement includes a statement that it will “provide accountholders with educational content to help them understand the cryptocurrency ecosystem, the risks and opportunities related to investing in cryptocurrency.” It will be interesting to see if tax accounting education will be included in this.
