This week, PayPal announced his entrance into the cryptocurrency market by letting its customers buy, sell and pay with Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH); in exchange for fiat currencies and directly through its platform. The new feature will be available soon, first for U.S. customers.
It might sound kind of wonderful because, until now, it was an authentic headache exchanging between PayPal and cryptocurrency. However, there’s something that isn’t right with this adoption: once on their platform, the company won’t let you transfer nor withdraw your cryptocurrencies.
You can find this worrisome information in their FAQ:
“Currently, you can only hold the Cryptocurrency that you buy on PayPal in your account. Additionally, the Cryptocurrency in your account cannot be transferred to other accounts on or off PayPal (…) You own the Cryptocurrency you buy on PayPal but will not be provided with a private key (…) If you can log in to your PayPal account, you will have access to Cryptocurrency balance you hold”.
Inside the cryptocurrency world, there’s a motto that everybody should remember: not your keys, not your coins. The private key, as PayPal knows, “is a person’s secret code to access and manage their Cryptocurrency. If lost, stolen, or even forgotten they can never get to their Cryptocurrency again”.
Of course, if they don’t even have it since the beginning, it’d be impossible for them to owning by real their cryptocurrencies. The PayPal customers who’ll decide to use cryptos inside their platform will lose hold of their own funds till they exchange it for products or another currency. And if there’s a problem with their account, the cryptos probably would lose forever.
The worst part is that PayPal is sadly famous for freezing accounts without previous notice, and usually for no valid reason at all. The social network Diaspora was a victim of it in 2011 when it reached 45,000 USD for donations through PayPal. Their account was frozen without explanation and was released only after a legal threat, still without any excuse.
Shelley Michaels, a 25-year-old trainee lawyer from Bedfordshire, was another victim, and she did have to take her case to the court just for selling more items than usual on eBay. Luckily for her, she won, but not everybody has the same luck.
Positive vs Negative: Bitcoin on PayPal
PayPal has around 346 million global customers, and that’s, at least, good news for Bitcoin and blockchain tokens: it implies a higher adoption and general awareness for cryptoassets. So to say, you can call it a huge advertisement for cryptos.
It already worked, if you think about it: Bitcoin surpassing 13,000 USD and most of the market in bright green is a really good sign.
However, the actual use of cryptocurrencies inside PayPal is probably not the best option around, unless you’re going to exchange it right away for another currency or product. But you’ll have to deal with the usual high fees and maybe more, considering this feature is possible because of the PayPal alliance with Paxos service.
The risk of a frozen account out of a sudden is also there, pending like a Damocles’ sword. That’s why it’s better to use some non-custodial cryptocurrency exchange (like Alfacash), where your funds will be only yours from the beginning to the end.
Featured image by mohamed Hassan / Pixabay
Originally published at https://blog.alfa.cash on October 22, 2020.