PayPal announces partnerships with BitPay, Coinbase and GoCoin

One of the biggest concerns about PayPal’s rapidly approaching integration with bitcoin-based payments has been liquidity. The eBay-owned payment processing giant handled around $180 billion in transactions last year, roughly 30 times bitcoin’s total market cap. If PayPal aims to bring bitcoin payments to the masses, even a relative giant in the space, like Coinbase, could have severe liquidity problems. To alleviate that issue, PayPal appears to have decided that now is not the time to play favorites. Yesterday, the company announced new agreements with BitPay, Coinbase’s biggest competitor, as well as up-and-coming cryptocurrency payment playform GoCoin.

The move to include all three payment processors is not a small one. PayPal is adding a “Pay By Bitcoin” option to their Payments Hub, allowing any PayPal-accepting business to receive payment in bitcoin via their new payment partners. The service will roll out for North American merchants first, with international adoption to follow.

The new partnerships don’t mean that PayPal is directly accepting bitcoin, however. Users will send BTC to be processed via Coinbase, BitPay or GoCoin, and then that payment is settled under PayPal’s system in dollars. While definitely progress, it’s not quite the bitcoin-integrated wallet PayPal has been hinting at since earlier this year. The current partnership might also be an indirect hint of PayPal’s long-term attitude towards bitcoin, strongly suggesting that liquidity levels and price per coin are still far too low, and thus too risky, for direct adoption.

Bitcoin’s price jumped nearly $50 following the news, although it’s unclear if PayPal was the only factor. Yesterday appears to have marked the first direct BTC purchases by the GABI hedge fund, which could also account for the massive purchases observed on the market.