5 Reasons Why You Shouldn’t Store Your Cryptocurrency in PayPal

The push towards mass adoption of cryptos continues to gain momentum. Governments and prominent business leaders who had shown reservations in their adoption are warming up to the industry now. It’s easy to see why these developments cause so much excitement. These stakeholders influence significant populations in their areas of operation. Consequently, their endorsement of crypto transactions is a massive shot in the arm for the efforts geared towards their mainstreaming.

PayPal is the latest major player in the crypto world. Its announcement that it would allow digital asset transactions on its platform continues to elicit various responses. What this change of tune means to the crypto community, and if it’s sound for one to hold their funds on the platform, should they be worried?

Significance of Paypal’s Crypto Entry

PayPal’s expertise in online transactions is well known. Additionally, it has over 300 million active accounts and 26 million merchant accounts, which give it a significant reach. Its actions could potentially alter the crypto landscape.

Allowing crypto trading on its platform opens the world of digital payments to millions of people. Having an easy account set up process and its convenience are incentives for users to hold funds on its platform. However, this may not be a prudent step.

The Downside of Saving Funds On PayPal

Whereas PayPal’s entry into the crypto world is welcome, its enthusiasts should resist the temptation to hold their funds on this platform. Here are the reasons supporting that stance.

Wallets are Custodial

One of the fundamental principles governing cryptocurrencies is the decentralization of functions. Guided by this principle, many crypto projects adopt non-custodial wallets. This accord the users with ownership of their private keys hence full autonomy in their transactions.

At Odds with Basic Principles

PayPal’s crypto project runs counter to this basic tenet. Part of its terms and conditions state that users will not hold the crypto-assets themselves in their asset balances. Additionally, Paxos or any other entity that PayPal authorizes to do so will have all custody of trading and assets on the platform.

Nothing but HODL

This emasculation of the users denies them the ability to:

  • Send crypto to family and friends.
  • Purchase goods and services using cryptos.
  • Transfer their assets to another wallet on the platform.
  • Withdraw funds to an external wallet.
  • Transact on any other exchanges apart from PayPal’s sanctioned one(s).

In a nutshell, you can’t do more than HODL.

Fears of Account Suspension

A common complaint against PayPal is their swiftness to freeze one’s account at the slightest whiff of suspect activity. The firm can hold the funds for up to 180 days, presumably to authenticate the transactions. Even then, some users have complained of the firm seizing the funds after the expiration of the hold period without giving explanations. One can expect that their adoption of cryptos won’t alter this reality.

KYC Requirements

PayPal requires strict adherence to KYC requirements before one can trade on its platform. Apart from their name and physical address, a customer will have to provide their date of birth and taxpayer identifier number. Additionally, PayPal may require them to submit a copy of their government-issued photo ID or utility bill to prove their residence.

Although critical in stemming crypto support for illegal activities, KYC flies in the face of Satoshi’s intentions. To the crypto purists, these actions negate the anonymity principle inherent in blockchain technology. There’s the danger of exposure of private information.

Crypto Payments to be settled in Fiat Currency

The irony in PayPal’s crypto product is that you cannot make purchases in them despite holding them in your account. PayPal will allow you to pay in crypto while shopping with its 26 million merchants spread worldwide. But there’s a catch to it. The merchants will not receive the funds in the crypto you’ve transacted in. Instead, the platform converts the funds to fiat at a fee.

The Customers Pain

Denying customers the ability to settle transactions in crypto exposes them to higher fees than they would have incurred if the reverse were the case. The following table indicates the rates obtaining per transaction:

Purchase or sale amount Fee
1.00 – 24.99 USD 0.50 USD
25.00 – 100.00 USD 2.3% of purchase or sale amount
100.01- 200.00 USD 2.00% of purchase or sale amount
200.01- 1,000.00 USD 1.80% of the purchase or sale amount
1,000.01 USD + 1.50% of the purchase or sale amount

Caps on Transactions

PayPal limits the weekly crypto transactions to $15,000. For those intending to transact larger amounts, this regulation makes holding funds on the platform unattractive.

Final Word

Bitcoin live price
price change

Crypto enthusiasts should welcome PayPal’s entry into the crypto space with caution. On the face of it, it is news celebrated. Its reach could make a lot of difference in the push towards mass adoption. Disappointingly though, it contradicts the very foundations of blockchain technology and cryptocurrencies. As evident from the issues raised above, it takes away a user’s autonomy in managing their account. Moreover, by appointing a third party to manage all the crypto assets and transactions on its platform, it centralizes rather decentralize them. PayPal’s new platform is in its early stages, and we may see changes in the product moving forward, but as of today, it wouldn’t make sense to hold one’s funds on the platform.

Stay up to date with our latest articles

More posts

What Is CBDC In Crypto?

The cryptocurrency trading revolution exploded more than ten years ago and led to an almost unprecedented economic and financial earthquake. As a result, people are learning to change their approach to payment and investment systems, pushing up the price of many cryptocurrencies. Such a rapid change has not gone unnoticed on the boards of the world's major central banks. In fact, in an increasing number of countries, central banks are working on launching centralized digital currencies, known as CBDC. This…

How Social Leaders on Shrimpy help Investors Maximize Profits from Crypto Trading

The emerging trend of social trading allows millions of investors to interact with their peers and learn from accomplished traders in the crypto market. Every market participant wants to become a profitable crypto trader and maximize earnings from the ongoing crypto boom. Unfortunately, navigating the highly volatile space while grasping the complex learning curve that involves fundamental/technical analysis can be rather daunting. Becoming successful in the crypto market requires time to develop a working strategy that empowers investors to execute…

Decentralized Exchanges 2022: Which is the Best Crypto DEX to Trade on?

Market experts believe that the survival and growth of crypto largely depend on decentralization. The good news is that decentralized exchanges or DEXs have become highly popular, and the crypto market sees this as an opportunity to save the essence of traditional blockchain. Each decentralized exchange platform has the potential to revive and thrive crypto market. Moreover, each new DEX platform comes with its own set of features. There are several methods to use DEXs and make money.  Decentralized exchange…

Top Crypto Exchanges for Beginners in 2022

Investing in crypto is not as complex as most people think. So if you’re curious and optimistic about the rise of crypto, there is no reason to hold back and dive into it. Remember, it is normal for beginner investors to get caught in the cobweb of endless crypto exchanges. As a beginner investor, your objective should focus on the best crypto exchanges to make the right investment decisions. Whether it’s Bitcoin or Ethereum, cryptocurrencies continue to be at the…

Top 10 Cryptocurrencies in January 2022

Cryptocurrencies had a great year in 2021. In this period, we have seen the market go from being classified as a billion-dollar economy into a trillion-dollar economy. Aside from that, cryptocurrencies are gaining visibility in the mainstream world with, for example, El Salvador's adoption of Bitcoin as the official digital currency. As a result, investors are looking for the "new Bitcoin" on the market, hoping to find a great alternative in so-called altcoins. Unfortunately, many traders value an altcoin exclusively…

The Story Of Bitcoin And Ethereum’s Reversed Blockchains

Decentralization is the primary selling point of the three worlds of Bitcoin, crypto, and the web. There are several reasons for this. Some are related to the increased transactional efficiency that decentralization can provide. Others are related to creating permissionless, censorship-resistant digital networks. The most important is that decentralization weakens any single-point-of-failure, hence bolstering network security. This not only keeps a network as close to unbiased and ‘neutral’ as possible but almost guarantees its immutability. Yet the crypto world hasn’t…

What Are the Best Crypto Prediction Sites?

There are now several websites that provide, besides crypto live prices, some forecasts on the future of the leading cryptocurrencies. However, considering the market’s high volatility and the few analysis tools available to the public for formulating these forecasts, it must monitor these portals carefully. This article will report some of the primary sources of price forecasts in the crypto industry. However, we remind you that the information contained in the text does not constitute financial advice, and we invite…

Why Do the Cryptocurrency Prices Go Down on the Weekends?

If you have been in the crypto world for a while, you will probably have noticed a typical behaviour of the market during weekends. With some exceptions, we are used to seeing the price of significant cryptocurrencies drop over the weekend. The phenomenon is known to those who operate in this market, but understanding precisely the causes seems to be rather complex. Therefore, this article will discuss a definitive answer by analyzing the various main factors involved in this market…

How to Track and Stay Updated with Cryptocurrency News

Cryptocurrency is a young market and, as such, very fast-moving. If we exclude the phenomenon of stablecoins, the prices of cryptocurrencies change continuously, with sometimes very high volatility. Since a volatile investment is, by definition, a risky operation, traders usually look for ways to reduce the possibility of incurring significant money losses. In this context, it is vital to stay up to date with market events, even if this can be complex. As seen in the past, a single tweet…

Keeping Consensus: Explaining Ethereum’s Difficulty Bomb

Ethereum’s difficulty bomb is a tool for maintaining network consensus between all classes of participants. This is a challenging task for Ethereum compared to Bitcoin, which performs frequent backwards-incompatible hard-forks. The most significant of these – Ethereum 2.0 – is yet to come. When it does, the difficulty bomb will be crucial in ensuring the community’s smooth transition to the new protocol. Review: Ethereum 2.0 and Proof Of Stake To understand the necessity of the bomb, we must review some…