PayPal will soon begin offering support for cryptocurrencies by allowing its US-based customers to buy, sell and hold virtual coins using its online wallets.
Starting early next year, customers would also be able to use cryptocurrencies to shop at the company's 26 million merchants, as Paypal looks to capitalise on the renewed interest in digital coins.
The New York State Department of Financial Services said on Wednesday that it had given PayPal a conditional “Bitlicense" to offer its crytocurrency services.
Four cryptocurrencies - bitcoin, bitcoin cash, ether and litecoin - will initially be available through the new Paypal service, to be delivered in partnership with fintech start-up Paxos.
The company said it plans to expand the service to Venmo and other countries in early 2021.
Bitcoin gained as much as 4pc to $12,381 (£9,430) Wednesday following the news, just below the high of $12,473 set in August.
“We are proud to become the first company to receive a conditional virtual currency license from the New York State Department of Financial Services,” said Dan Schulman, Paypal's president and CEO, in a statement.
In an interview with Reuters, Schulman added the new service was designed to prepare Paypal - which has 346 million active accounts - for the wide variety of digital currencies that are being developed by central banks as well as corporations.
“We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role,” he said.
Central bank digital currencies, also known as CBDCs, are currently being piloted by seven countries including China and Sweden, according to Harvard University's Belfer Center.
For cryptocurrency advocates, Paypal's endorsement is big news.
"We have crossed the rubicon people," tweeted Mike Novogratz, CEO of cryptocurrency investment firm Galaxy Investment Partners.
Carsten Sørensen, digital currency expert at London School of Economics said: "The announcement that PayPal will support cryptocurrencies is a significant development in the slow and ongoing mainstreaming of cryptocurrencies."