Following the announcement by PayPal that you will soon be able to buy, sell, hold, and use your cryptocurrencies right within your PayPal wallet, we take a look at this new feature and what you can expect from it.
According to PayPal, the migration toward digital payments and digital representation of value is accelerating, fueled by the Covid-19 pandemic and the increased interest in digital currencies from central banks and consumers.
We took a deep dive into the new PayPal crypto wallet. Here are 5 things you should know about the new PayPal Crypto Service:
Instant Conversion to Fiat Currency
PayPal customers will be able to use their crypto holdings as a funding source to pay at any of PayPal’s 26 million merchants around the globe. The PayPal wallet enables instant conversion with certainty of value and no incremental fees. There will also be no additional integration fees.
Track Crypto Prices on the PayPal App
By default, users will be shown the change in crypto market over a 24-hr period using a line graph, with the option to toggle to view 1 week, month, 6 months, 1 year, and the entire history of the selected crypto.
PayPal will Charge a Margin Fee from the Exchange Rate
While PayPal will not charge a transaction fee when buying and selling crypto until 2021, PayPal will charge a spread (or margin) between the market price from the service provider, Paxos, and the exchange rate between US dollars and the crypto asset displayed to the user.
The estimated rate may also include an estimated spread of one-half of one percent (0.5%). PayPal however refrains from disclosing the spread it earns on each transaction.
You Cannot Transfer Crypto Out of PayPal
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.
PayPal Holds Your Crypto Private Keys
You own the cryptocurrency you buy on PayPal but will not be provided with a private key. Instead, you will only be able to access your crypto balance that you hold.
The approach of PayPal with crypto is likely the standard that big firms will take in order to dabble in crypto for obvious regulatory reasons.
By cutting off P2P transfers and having full dependence on third parties with zero chance of interacting with accounts outside their platforms, services like PayPal are defining how crypto is likely to go mainstream.
While is this clearly not the crypto we are used to, it provides an opportunity for more millions to join the crypto bandwagon.