US payments giant PayPal (PYPL) is set to enter the cryptocurrency space by offering bitcoin. Will ASX shares like Afterpay follow?
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It’s no secret that some of the most exciting shares out there are those involved in the payments space. How we pay for things has been of the areas most ripe for disruption, particularly in the shadow of the coronavirus pandemic. Much has been made of the pandemic-induced acceleration of the ‘death of cash’ this year. Just look at how ASX payments company shares like Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL) have performed this year (both up more than 1,000% since March).
But that’s just on the ASX. Some of the world’s most exciting payments shares are listed over in the United States – Visa Inc (NYSE: V), Mastercard Inc (NYSE: MA) and American Express Inc (NYSE: AXP) to name a few.
One of the most exciting companies that I’ve been watching in 2020, however, has been PayPal Holdings Inc (NASDAQ: PYPL). You might be familiar with PayPal, and perhaps its history as one of Tesla Inc (NASDAQ: TSLA) CEO Elon Musk’s earliest innovations.
Today, PayPal is a payments giant, with a market capitalisation of US$239 billion.
But a new development today has grabbed my attention further.
According to reporting in the Australian Financial Review (AFR), PayPal is set to offer users “the option to buy, hold and sell” bitcoin and other cryptocurrencies. According to the report, PayPal said this week that, “from early next year Bitcoin and other cryptocurrencies can be used as an instrument of exchange for those wanting to buy things from PayPal’s 26 million merchants.
With this move, PayPal joins Square Inc (NASDAQ: SQ), another US payments company that has offered cryptocurrency transactions for a while now. The AFR also reports that the pandemic has triggered a massive increase in usage of Square’s Cash App for cryptocurrency transactions.
So why is this significant?
Well, PayPal is a gorilla in the payments space. By making this move, it lends a lot of legitimacy to cryptocurrencies like bitcoin as an accepted payment method – and perhaps even as a store of wealth.
Whilst cryptocurrencies like bitcoin have been embraced by many investors, they remain a controversial asset for their anonymity, and use for nefarious purposes such as money laundering and black market commerce.
This move by PayPal might be a significant one in hindsight if it truly allows the legitimate use of cryptocurrencies as a proper currency.
If this endeavour proves successful for PayPal, I wouldn’t be surprised if it spurs further adoption of cryptocurrencies in the payments space. Fast forward 5 years, and we may well see ASX players like Afterpay and Zip Co Ltd (ASX: Z1P) offering cryptocurrency payments. Watch this space!
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Sebastian Bowen owns shares of American Express, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard, PayPal Holdings, Square, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Mastercard, PayPal Holdings, and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.