PayPal Accepts Bitcoin for Games, Ringtones and Music Purchases

Is anonymous currency going mainstream?

PayPal has dipped another toe into the uncertain waters of virtual currency by announcing that its customers can use Bitcoins to pay for digital music, games and ringtones.

Those payments won't be made directly through PayPal, however, but will be processed through partners BitPay, Coinbase and GoCoin, reports the San Francisco Chronicle. PayPal will reportedly get a referral fee from the three Bitcoin-based companies.

PayPal users wanting to use Bitcoins will do so through the PayPal Payments Hub, according to the company blog. Earlier this month, PayPal began accepting Bitcoins through its eBay payment system, Braintree.  

This latest move by PayPal is part of its wait-and-see strategy to determine how the world of cryptocurrencies plays out.

The company's blog makes its gradual approach clear by stating it supports innovation but that the development "does not mean that PayPal has added Bitcoin as a currency in our digital wallet or that Bitcoin payments will be processed on our secure payments platform."

One report suggests that PayPal's baby steps with Bitcoin minimizes the risk of fraud because the transactions for digital goods will be small.  

Scott Ellison, director of corporate strategy at PayPal, told Forbes, "Merchants were asking for Bitcoin integrations. Digital goods were an easy way to do it first…. People are comfortable paying online for those things."

But other companies, like Overstock.com, have already started accepting Bitcoin payments through processor Coinbase for items like furniture and laptops, a move that casts PayPal as something of a slow adopter.

No matter how big or small, the move by PayPal is an important endorsement by a big payment processing player in e-commerce. 

Remember that Bitcoin achieved much of its notoriety when it became the preferred currency for illegal drug purchases on Silk Road, which the feds put out of business. Bitcoins allow users to remain anonymous, which is why the currency rose in popularity on black market websites.