What are the financial implications of buying cryptocurrency from PayPal

With financial technology (fintech) firm PayPal introducing its cryptocurrency services, some 350 million PayPal account holders have had access to it, as Cointelegraph reported.

According to the publication, customers are required to log into their PayPal account where they must have funds through their credit or debit cards or a bank account. The fintech firm requires clients to comply with a Know Your Customer (KYC) verification and anti-money laundering measures by requiring them to submit certain documents, including a W-9 tax form.

Information from the publication indicated that the fintech firm offers a low-risk approach to owning cryptocurrency assets. Newly introduced cryptocurrency users, who have low risk tolerance, enjoy advantages. Additionally, PayPal incentivizes users through partnerships with multiple stores for users to make purchases of products and services with their cryptocurrency holdings.

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The publication’s data mentions indications that users should be aware of before purchasing cryptocurrency assets from PayPal:

Users have to go through a similar approval process with cryptocurrency exchanges

Cryptocurrency exchanges require their customers to go through the same type of approval process before signing up. Therefore, users need to purchase cryptocurrency directly from an exchange rather than the PayPal platform.

Users hold their fiat equivalent, not cryptocurrencies

PayPal does not allow users to have direct access to their cryptocurrency. The platform does not allow providing a digital wallet or wallet address. If users withdraw money from their cryptocurrency, they only have liquidity via fiat currency. Therefore, users would not be able to transfer bitcoins to PayPal.

Users cannot lend their cryptocurrencies

PayPal does not allow users to generate passive income through their cryptocurrencies that intend to maximize their returns, while smart contracts allow you to eliminate third parties from financial transactions.

Users may incur fewer fees with cryptocurrency exchanges

PayPal charges high fees for its services, and cryptocurrency holdings shouldn’t be kept out of reach. Cryptocurrencies purchased from an exchange may be better suited to customers. Decentralized finance (DeFi) can provide passive income opportunities, such as actions to support a blockchain network, provide liquidity or produce agriculture, through exchanges.

The selection is limited

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

(With information from Cointelegraph)

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