With cryptocurrencies like Bitcoin booming, everyone wants to invest in it or be part of the boom. As the public shows more interest in crypto, more platforms and wallets have begun supporting Bitcoin. The best example of this was in November 2020 when PayPal announced that eligible PayPal account holders in the US could purchase cryptocurrencies like Bitcoin directly on their platform.
This news was followed by their announcement on October 21st, 2020, that stated PayPal would introduce the option to buy and sell cryptocurrencies by partnering with Paxos Crypto Brokerage. This seems like a great initiative in theory, but there’s a catch. The bitcoin you buy on PayPal cannot be transferred out of PayPal’s digital wallet.
Soon, the United States users will be able to buy products using cryptocurrencies from 26 million merchants via PayPal. The payments will be converted to fiat currencies during the point of sale. PayPal plans to expand to select international markets by the first half of 2021.
Now, as a PayPal user or crypto enthusiast, you may wonder how to buy Bitcoin on PayPal. In this article we will explain the steps. However, before you go out and buy some, make sure you understand what you are buying as you might not actually be buying BTC.
How to Buy Bitcoin on PayPal?
Before you can purchase any cryptocurrency on PayPal, you need to be an eligible account holder. If you don’t have an account, you can quickly set it up with your bank account or credit card and email address here. Once you have set up your account, you can now buy some BTC (current for US users).
- On the homepage, select the “Buy Bitcoin and more” banner on the page’s top.
- Select the cryptocurrency you want to buy. At the moment, you can buy or sell Bitcoin, Ethereum, Bitcoin Cash, or Litecoin.
- You can choose a pre-set amount of Bitcoin to purchase and then click on Buy. The minimum you can buy on PayPal is $1 worth of Bitcoin.
- You need to confirm your details and agree to PayPal’s Cryptocurrencies Terms and Conditions.
- Now you can enter the amount of BTC you’d like to buy, for example, $10, and then select “Next”.
- Choose your payment method and select “Next”.
- You can review your order and select “Buy Now” when you’re ready.
PayPal charges reasonable fees, ranging from 50 cents for under $25 to 1.5% of the transaction for purchases over $1000. PayPal also includes a brief description of the assets being purchased. They will also provide you with resources to learn about the cryptocurrency and the risks involved.
Once the purchase is complete, your account will contain the amount of crypto purchased and the current value. Back at the homepage, you can see your crypto purchase with an option to buy and sell. Any crypto-asset sold via PayPal will be converted to fiat currency and show in the cash balance section. PayPal also shows a fee chart and conversion spread for its users.
How to Buy Bitcoin on Other Platforms Using PayPal?
PayPal has placed restrictions on users buying crypto from its platform. Users cannot transfer the crypto out of PayPal’s digital wallet (yet). However, we are unsure whether the feature will be added later or what impact this will have on the crypto service on PayPal.
If you want to use PayPal to purchase Bitcoin from other platforms, your options are quite limited. Most exchanges do not support PayPal as a payment method. This is due to the chargeback policy that heavily favours the users in case of a fraudulent transaction.
Users can get their money back and still hold on to the crypto assets purchased. Platforms like PayPal have no way to verify such fraudulent disputes.
Be Aware: If you Buy Bitcoin on PayPal, You Didn’t Buy Bitcoin.
PayPal actually offers a non-Bitcoin settled proxy to Bitcoin wallet, which you cannot withdraw from. What this means is that PayPal needs to keep topping up their Bitcoin reserves to supply the demand. There may be a time lag between the users requesting to purchase Bitcoin and PayPal stocking up on BTC.
So, if you have bought Bitcoin on PayPal, what did you actually buy?
All you are buying is exposure to BTC prices from a mediator or custodian whom you trust with risk management. This is only great for price speculation and driving the market up. You do not get access to the entire Bitcoin system; instead, you only gain a fraction of access via PayPal. However, there is a significant risk on the intermediaries such as PayPal due to arbitrage and regulations.
The BTC market can turn upside down at any moment. This means PayPal needs to have a large reserve of BTC and not sell BTC they don’t have. It also may cause huge investments from PayPal, increasing the number of keys they hold.
The more number of keys held, the better consensus they have in the network. This is a concept known as proof of work, which is the original consensus algorithm in a blockchain network. In Blockchain, this algorithm is used to confirm transactions and produce new blocks to the chain. Since Bitcoin is a decentralised cryptocurrency that gives more power to its users, when more intermediaries stock up on BTC, they become active participants in consensus. They will have more control over Bitcoin and its functioning.
You will be sacrificing the true nature of Bitcoin for price appreciation. This may not end well for Bitcoin as a decentralised crypto asset.
Remember This: Buy From An Exchange
If you buy Bitcoin or any cryptocurrency on PayPal, you didn’t actually buy it. As a user, you do not gain the first-hand experience of all the features and cryptocurrencies’ functionality. You are only exposed to what PayPal offers, which is just a small fraction of a sea of features. So instead, you should buy BTC from a reputable source such as Zipmex, which offers insurance to ensure you don’t lose your Bitcoin.
Platforms like PayPal are taking on too much risk to provide their users with a second-hand crypto experience. But this risk may be balanced by gaining more consensus in the Bitcoin network.
At the end of the day BTC is gaining greater exposure with and being adopted by the masses, but just a word of general advice, to be sure to arm yourself with the knowledge of what’s happening in the background – especially if you plan on withdrawing your Bitcoin from Paypal.