Investing In Bitcoin With Paypal: Here’s What You Should Know
More than ever, buying and investing in cryptocurrency is now easier, especially for people in the PayPal ecosystem. This is because the company has delved into the crypto market in the last year, allowing U.S traders to hold, buy, sell and use crypto in checkouts. Crypto that is tradable on PayPal includes Bitcoin, Ethereum, Bitcoin Cash(BCH), and Litecoin.
The company’s mobile wallet, Venmo, also allows PayPal users to buy and sell cryptocurrencies on it. Paypal allows users to invest as little as $1 and customers don’t have to open any special account to render these trades.
Although these offers sound very captivating, there are more to it. For this reason, we will be sharing some of the major facts you should know when investing and buying Bitcoin with PayPal.
The Crypto Is Technically Not Yours
Usually, when you are buying bitcoin, you are usually offered two keys to make your ownership legitimate. That’s a private and a public key.
The private key allows you to control the wallet while the public key is what carries your wallet address.
But with PayPal, you just have access to only your private key as the company controls the public key. The company in their “Crypto on PayPal FAQ” page explained that the cryptocurrency in your account is not transferable to other accounts in Paypal or off Paypal.
This arrangement is odd and limits the use of the platform for crypto. So you may not be able to freely use the coin as you wish.
According to the general manager at Ripple, Asheesh Birla, the PayPal arrangement is similar to when you deposit your United States dollars with the Bank of America. In His statement, “You’re trusting that Bank of America actually has your U.S. dollars in their bank accounts, and they’re giving you an IOU.”
So, the user cannot transfer their coin to a wallet out of the PayPal ecosystem nor can they move it to a desired cold storage.
The policy also reduces the potential issues of the Know-Your Customers (KYC) or antimony laundering (AML) that most prominent investors have in the management of wallet to wallet transfer outside their platforms.
It’s Easy to Store Bitcoin
Sincerely, not many people are able to safely secure their crypto holdings. This is because losing your private and public keys means you have completely lost your crypto.
So, people who are new to cryptosystems and do not have the ability or privacy in holding their private and public key will feel safer leaving it to PayPal.
For instance, the former CTO of Ripple lost his private key and lost about $400 million worth of bitcoin at today’s price.
Paypal also made the dashboard quite easy to use by any user. All you have to do to buy is click the button below the coin that says “Buy”.
The system has low friction and is great for people who intend to buy a small amount of bitcoin. According to portfolio manager and founder of Quantum Economics, Mati Greenspan, people who are conscious of self custody will not be using the service.
Account is Susceptible to Freezing
Like all exchanges, there is the uncertainty of encountering some amount of risk. Paypal has had a long history of freezing accounts. Which has been annoying to most of their users.
There’s also a tendency that they will be given to some threats as seen with most centralized exchanges, which can generally affect lots of users.
But there is no defined cause or answer as it depends on your usage and risk-taking ability, according to Birla.
At some point, one of the leading bitcoin exchanges at the time, Mt. Gox had the first hack in the history of cryptocurrency. The platform lost 100,000 of its bitcoin and 750,000 of its users.
The PayPal Policy Could Change
There is nothing that can hinder PayPal from changing its mind concerning the policies concerning Bitcoin.
The so-called Paypal of Europe, Revolut, has surrendered earlier this week. The company now allows customers to be able to withdraw bitcoin, and this can most likely be the case of PayPal in the future. However, regulations may pose a barrier to this.
The Treasury Department in December proposed a new KYC requirement that would require companies like Coinbase and PayPal to relate their user identities and their crypto wallet together.
This is important if they want to send coins from their centralized exchange platform to their wallet.
In Birla’s statement, “It’s hard to imagine that PayPal – being more conservative by nature – is going to enable that without having some sort of solution in place to make it compliant with the regulations that are being proposed by the U.S. government.”
It’s a Financial Investment
Buying bitcoin with PayPal is like making a financial contract. This is because you cannot send the coin from the platform nor can you send it elsewhere. It is almost like buying something like bitcoin instead of the bitcoin itself.
Just like any financial contract, the investor stands the chance to win or lose.
Recently, Bitcoin reached an all-time high of more than 63,000, and the price is expected to even go higher in the next months.
So, investing your Bitcoin with PayPal is already like an investment that you can watch your coin grow.
According to the Deutsche bank’s April 19 note to clients, the trading volume in PayPal may increase to $20 billion this year.
The rate of buying and selling crypto with PayPal is increasing daily and the future expectations of Bitcoin is making people invest more in it.
The company also allows customers in the United States to buy and sell with their crypto, but the crypto will be converted to fiat during the transaction.
However, this doesn’t apply to PayPal users in the United Kingdom as they can only buy, sell and hold.