CryptoPotato
CryptoPotato
  • Crypto News
  • Margin Trading
  • Guides
    • Bitcoin & Crypto Guides 101
    • Bitcoin For Beginners
    • Editorials
  • Fund
  • Buy
  • Language
    • Türkçe
  • Crypto News
  • Bitcoin For Beginners
  • Cryptocurrency Guides 101
  • Editorials
  • Bitcoin & Crypto Margin Trading
  • Bitcoin Price Analysis
  • CryptoPotato Crypto Fund
  • Ethereum (ETH) Price Analysis
  • Ripple (XRP) Price Analysis
  • Market Updates
  • Interviews
  • Buy Bitcoin with Card
  • Türkçe
  • bitcoin
    BTC$51,627.00
  • ethereum
    ETH$1,745.69
    • Market Updates
    • BTC Analysis
    • ETH Analysis
    • XRP Analysis
    • Interviews
    Home » Editorials » The Good and The Bad About Cryptocurrency on PayPal

    The Good and The Bad About Cryptocurrency on PayPal

    Author: Martin Young

    Last Updated Oct 23, 2020 @ 13:19

    Crypto market capitalization surged by $25 billion following the news that PayPal would be enabling cryptocurrency payments, but there are a lot of caveats that the average user needs to know about.

    Global payments provider PayPal has almost 350 million users and 26 million vendors in its network so the introduction of crypto payments has been widely lauded as bullish for the industry.

    Crypto markets surged and Bitcoin cranked to a new 2020 high of $13,200 during the hours after the news broke. Many industry experts have praised the move as a great thing for Bitcoin and the entire crypto ecosystem, but all might not be what it seems.

    User base:
    PayPal 346m+
    Bitcoin 187m+

    This is a big deal.

    Estimating how many HODLers of BTC from on-chain forensics is from the incredible work of @glassnode. pic.twitter.com/QlOkZ9WRJZ

    — Willy Woo (@woonomic) October 21, 2020

    Enabling decentralized digital assets on a highly centralized platform with astronomical fees may not be the best combination, and here is why.

    No Crypto Withdrawals, Big Fees

    Firstly, PayPal will not allow crypto assets to be withdrawn to external wallets, so essentially once they’re on the platform PayPal can set whatever price it wants for users needing to convert back to fiat.

    ADVERTISEMENT

    If anyone has used PayPal to change currencies or send money to an account in another country they’ll be painfully aware of the forex spread which can be as much as 8% depending on the currency being converted. OKCoin COO Jason Lau pointed out the pain that may be in store regarding the fees.

    Paypal’s crypto offering has some caveats:

    1) Users won’t be able to withdraw.
    2) Expensive. You have to pay a spread AND fees. pic.twitter.com/zNIyb542rb

    — Jason Lau (@jasonklau) October 21, 2020

    Additionally, PayPal will not allow crypto transfers between different accounts as observed by lawyer Jake Chervinsky;

    This is the highlight of the PayPal news for me.

    They’re not only preventing withdrawals to self-custody, they won’t even allow transfers between accounts.

    I’d be glad to speak with @PayPal‘s legal team about why these restrictions aren’t required for regulatory compliance. pic.twitter.com/DIVUqkCkGC

    — Jake Chervinsky (@jchervinsky) October 21, 2020

    Essentially, PayPal has mimicked the purchasing of crypto assets on trading platforms such as Robinhood, offering users exposure to the asset but preventing them from owning it independently. Chervinsky added if you can’t make withdrawals to self-custody, and don’t hold your own keys, is it even Bitcoin?

    The Taxman Cometh

    The whole setup could also open a huge can of worms when it comes to taxes. PayPal is only offering crypto services to U.S. account holders initially, and America happens to have some of the harshest tax regulations on the planet.

    The U.S. Internal Revenue Service (IRS), classifies crypto assets such as Bitcoin as property, not currencies, therefore they are subject to capital gains taxes. The means that PayPal users buying, selling, or spending crypto will be generating taxable events that need to be reported.

    If a user buys a smartphone using Bitcoin, for example, they would need to declare the price they obtained the BTC at, and the price it was when they sold it for the item, paying taxes on any gains it may have made in addition to VAT on any items purchased.

    The documentation for reporting is a minefield and PayPal has already stated it is down to the individual, not them, to complete tax returns.

    “It is your responsibility to determine what taxes, if any, apply to transactions you make using your Cryptocurrencies Hub.”

    The good news is that PayPal may introduce the concept of cryptocurrency to millions of new users, but the drawbacks will probably prevent them from using the platform in the long run.

    SPECIAL OFFER (Sponsored)
    Binance Futures 50 USDT FREE Voucher: Use this link to register & get 10% off fees and 50 USDT when trading 500 USDT (limited offer).

    PrimeXBT Special Offer: Use this link to register & enter CRYPTOPOTATO35 code to get 35% free bonus on any deposit up to 1 BTC.

    You Might Also Like:

    • paypal
      PayPal to Enable Bitcoin and Crypto Purchasing and Selling
    • Bitcoin Weekly Market Update
      Bitcoin Breaks To New 2020 High on PayPal News: This Was The Weekly Crypto Market Update
    • bitcoin_moon_cover
      Bitcoin Price Moons to New 2020 Highs on PayPal News
    Tags: Bitcoin PayPal
    Enjoy reading? Share with your friends
    Facebook Twitter LinkedIn Telegram

    About The Author

    Martin J. Young
    More posts by this author

    Martin has been writing on cybersecurity and infotech for over two decades. He has previous trading experience and has been covering developments in the blockchain and cryptocurrency industry since 2017. Contact Martin: LinkedIn

  • bitcoin
    BTC$51,627.00
  • ethereum
    ETH$1,745.69
  • Join Our Community

    FacebookTwitter YouTubeTelegram


    ADVERTISEMENT
    pionexb
    2local
    Bitcoin Editorials
    What is Dogecoin (DOGE)? 5 Facts About the Crypto That Started as a Joke 

    What is Dogecoin (DOGE)? 5 Facts About the Crypto That Started as a Joke 

    The Laser Eyes Meme: Not a Coincidence That This Marked a Local Top for Bitcoin (Opinion)

    The Laser Eyes Meme: Not a Coincidence That This Marked a Local Top for Bitcoin (Opinion)

    What Are the Risks of Governance Tokens? (Opinion)

    What Are the Risks of Governance Tokens? (Opinion)

    The Bitcoin Bubble Effect: Yes, We Are in a Very Early Stage (Opinion)

    The Bitcoin Bubble Effect: Yes, We Are in a Very Early Stage (Opinion)

    Will Bitcoin Price Rally Continue In 2021? 8 Key Considerations

    Will Bitcoin Price Rally Continue In 2021? 8 Key Considerations

    Join Our Newsletter
    Become a CryptoPotato VIP
    One Weekly Email Can Change Your Crypto Life.
    Sign-up FREE to receive our extended weekly market update and coin analysis report
    We NEVER send spam. You can unsubscribe at any time.
    Invalid email address
    Thanks for subscribing!
    About
    Advertise on CryptoPotato
    About Us | Contact Us

    Terms of service | Privacy Policy | GDPR
    More Sections
    IEO List | Evaluations
    Airdrops
    Scholarship
    Cannabis Stocks News | Market Analysis
    Disclaimer
    Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. Full disclaimer
    © Copyright CryptoPotato 2016 - 2021
    Scroll to top
    One Weekly Email Can Change Your Crypto Life.

    Sign-up FREE to receive our extended weekly market update and coin analysis report

    We never send SPAM. You can unsubscribe at any moment
    Invalid email address
    Thanks for subscribing!