PayPal Holdings said that it will allow customers to hold bitcoin and other virtual coins in its online wallet and shop using cryptocurrencies at the 26 million merchants on its network.

The new service makes PayPal one of the largest U.S. companies to provide consumers access to cryptocurrencies, which could help bitcoin and other cryptocurrencies gain wider adoption as viable payment methods.

U.S. account holders will be able to buy, sell and hold cryptocurrencies in their PayPal wallets over the coming weeks, the company said. PayPal plans to expand the service to its peer-to-peer payment app Venmo and some other countries in the first half of 2021.

The ability to make payments with cryptocurrencies will be available from early next year, the company said.

Other mainstream fintech companies, such as mobile payments provider Square Inc. and stock trading app firm Robinhood Markets Inc., allow users to buy and sell cryptocurrencies, but PayPal's launch is noteworthy given its size.

The company has 346 million active accounts around the world and processed $222 billion in payments in the second quarter.

Bitcoin and other virtual coins have struggled to become established as widely used forms of payment despite being around for more than a decade. Cryptocurrencies’ volatility is attractive for speculators, but poses risks for merchants and shoppers. Transactions are also slower and more costly than other mainstream payment systems.

PayPal believes its new system will address these issues as payments will be settled using traditional currencies, such as the U.S. dollar. This means PayPal will be managing the risk of price fluctuations and merchants will receive payments in virtual coins.

PayPal's service comes as some central banks have announced plans to develop digital versions of their currencies, following a Facebook-led  cryptocurrency project Libra in 2019, which was met by strong regulatory pushback..

PayPal was among the founding members of this project but dropped out after a few months. PayPal has secured the first conditional cryptocurrency license from the New York State Department of Financial Services. The company will initially allow purchases of bitcoin and other cryptocurrencies called ethereum. PayPal is teaming up with cryptocurrency firm Paxos Trust Company to offer the service.

Source- Reuters