Fishing In The Mainstream: Cryptocurrencies net Paypal
November 9, 2020
3 min read
What's going on here?
PayPal has announced it will allow US users to hold and spend a range of cryptocurrencies in their digital wallet.
What does this mean?
Unless you’ve been living under a rock for the past few years, you’re probably well familiar with terms like Bitcoin, blockchain, and cryptocurrency. Joe Public could hardly avoid news of the Bitcoin frenzy in 2017, when its value shot up to around £15,000.
Of course, this excitement was short-lived, and Bitcoin crashed. Traditional investors and big banks have largely shied away from cryptos because of this value volatility; but also because of their long transaction verification time and association with dark web crime. As a result, Bitcoin and rivals like Litecoin have struggled to establish themselves in mainstream markets.
But the pandemic has stimulated almost total dependence on digital payment, and cryptocurrencies are beginning to reel in traders, banks, and consumers. Paypal is the latest big catch, having recently acquired a conditional “Bitlicense” in the US. PayPal customers in the US will soon be able to hold and spend different cryptocurrencies at more than 20m online retailers. A fintech start-up called Paxos will guarantee an exchange rate at the moment of transaction to mitigate price fluctuation.
What's the big picture effect?
With 350m active accounts worldwide, Paypal is the perfect platform for Bitcoin and other cryptos to establish a position in conventional consumer spending. Paypal’s chief executive said “the shift to digital forms of currencies is inevitable”. It’s no surprise, then, that Paypal isn’t the only one with eyes on a digital future. Earlier this year, VISA announced a partnership with crypto giant Coinbase, and have produced a debit card that can be loaded with cryptocurrencies and spent almost anywhere. Mainstream investors may soon find themselves nibbling too, despite any ill feeling from the value crash. In 2019, Bitcoin returned over 16% for dedicated investors, whereas traditional hedge fund strategies yielded just 10.4%. A specialist cryptocurrency investment company said: “Bitcoin has a higher return on a one, three, and 10-year basis than any other asset class”.
So as digital currencies creep into our daily lives, lawyers need to grab the bull by the horns. It’s no secret that the UK is striving to become the global hub of fintech. This means we can anticipate a swell in demand for digital currency experts, and some clients may expect firms to accept digital currencies as payment for services.
However, it is blockchain, rather than digital currencies themselves, which hold the most potential for lawyers. Blockchain seeks to eradicate fraud by using complex mathematical problems to create an irrefutable record of events. For digital currencies, blockchain is used as a ledger, but this is just the tip of the iceberg of possibilities. For example, it could be used to create an immutable chronology of corporate acts by recording all documents and transactions. IP lawyers may soon adopt blockchain to evidence the inception and points of use of IP rights, making it simple to identify theft. Or maybe it could supplement the land register – read more here.
Blockchain is also the front runner as the solution to the inefficiency crisis in the British courts. Cases are rearranged 50% of the time, which leads to “re-keying in the same information; repeatedly printing and photocopying the same documents; moving files about, losing all or parts of them in the process”. A report suggests that blockchain could eradicate this paper-heavy approach, by providing a decentralised record of information. Permissions to view records could be set at various levels, and interested parties could receive instant updates on progress.
So as this once underground, abstract concept establishes mainstream credibility, how long will it be before we don’t know what we did before cryptocurrency?
Report written by Rory Crawford
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