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What are the financial implications of buying cryptocurrencies from PayPal

Reportedly, 350 million PayPal account holders have gained access to cryptocurrency services

Insights stated that the fintech company provides a low-risk approach towards ownership of cryptocurrency assets
Insights stated that the fintech company provides a low-risk approach towards ownership of cryptocurrency assets

With financial technology (fintech) company PayPal introducing its cryptocurrency services, around 350 million PayPal account holders have gained access to it, as stated by Cointelegraph. 

According to the publication, customers are required to log into their PayPal account where they need to have funds available through their credit or debit cards or a bank account. The fintech company asks customers to comply with a Know Your Customer (KYC) verification and anti-money laundering measures for which they have to submit certain documents, which includes a W-9 taxation form.

Insights from the publication stated that the fintech company provides a low-risk approach towards ownership of cryptocurrency assets. Newly introduced cryptocurrency users, who carry a low-risk tolerance, get benefits. Furthermore, PayPal incentivises users through partnerships with different stores for users to make purchases of products and services with their cryptocurrency holdings. 

The publication’s data mentioned the pointers users need to be aware of before they buy cryptocurrency assets from PayPal:

Users have to undergo a similar approval process with cryptocurrency exchanges

Cryptocurrency exchanges require their customers to go through the same kind of approval process before their sign up. Thus, users should buy cryptocurrency directly from an exchange instead of the PayPal platform.

Users hold their fiat equivalent, not cryptocurrencies

PayPal doesn’t allow users to have direct access to their cryptocurrency. The platform doesn’t provide the facility to provide a digital wallet or a wallet address. If users cash out on their cryptocurrency, they have liquidity available only through fiat currency. As a result, users won’t be able to transfer bitcoin to PayPal. 

Users can’t lend their cryptocurrencies

PayPal doesn’t allow users to generate passive income through their cryptocurrencies who intend to maximise their returns, whereas smart contracts enable the elimination of third parties from financial transactions.

Users might incur less fees with cryptocurrency exchanges

PayPal charges high fees for its services, and cryptocurrency holdings are expected to not be kept out of its purview. Cryptocurrencies bought from an exchange can be suited more for customers. Decentralised finance (DeFi) can offer passive-income opportunities such as to stake to support a blockchain network, to provide liquidity, or yield farming, through exchanges.

Selection is limited

PayPal chooses to offer only four kinds of cryptocurrencies such as bitcoin, ethereum, bitcoin cash and litecoin, which are less susceptible to volatile price movements.

(With insights from Cointelegraph)

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