With Facebook finally entering the market and PayPal incorporating cryptos, the coming months could be a milestone
Bitcoin has been hovering around a record high of US$20,000 this week, creating both excitement at the possibilities and fear of a 2017-style crash.
But beneath the headline-grabbing rollercoaster ride of a handful of big names, the underlying story of digital currencies continues to unfold.
The pandemic has changed the views of many investors, forcing pivots in portfolios and, according to some, pitching Bitcoin against gold as a strategic hedge.
Could we now be on the verge of digital currencies becoming mainstream?
Bitcoin’s trajectory aside, the potential for 2021 to be the year of cryptos is increasing with Facebook finally planning for a limited roll-out of its digital payments solution, formerly called Libra but now renamed Diem; and PayPal deciding to incorporate cryptocurrencies (PayPal was one of the original backers of Libra but pulled out).
"We were going to provide the capability for our customers to buy, sell and hold cryptocurrencies inside the PayPal wallet, because we had done market research and something like 54% of our base wanted that capability," explained Dan Shulman, CEO and president of PayPal, speaking at the recent online Web Summit.
But PayPal has expanded the plan: “…because, once you buy cryptocurrency, you really want to be able to use it both as an investment vehicle but, importantly, as a funding source to make other purchases," he added.
Volatility concern
Shulman noted concern over the volatility of digital currencies and admitted that he had considered it a “poor form of currency” with the risk of wiping out small merchants’ profits.
But PayPal will ensure that consumers are aware of the exact exchange rate of the cryptocurrency at the time of transaction.
And the global payments firm’s chief is now convinced that cryptos are here to stay – and not just Bitcoin.
"I think that if you can create a financial system, a new and modern technology that is faster, that is less expensive, more efficient, that's good for bringing more people into the system, for inclusion, to help drive down costs, to help drive financial health for so many people... So, over the long run, I'm very bullish on digital currencies of all kinds," he said.
Facebook project
The long-awaited Facebook-backed digital currency is now nearly launch.
However, it appears that it will be a very limited entry into the market to begin with according to a report in the FT.
Citing sources close to the project, the article says that a single coin will be launched as early as January 2021, backed one-for-one by the US dollar. Expansion will come later.
The launch of the coin, renamed Diem, is subject to approval from market regulators in Switzerland.
Meanwhile, the rest of the global financial services industry continues to put a toe in the water of digital currencies, including the recent filing from CI Global Asset Management with intention to launch its own fund offering exposure to Bitcoin.
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