As many people have already heard,
on 21 October, PayPal introduced an option for its users to buy, hodl, and sell (exchange back to fiat) cryptocurrencies. At the moment, it is not possible to use your coins to shop and purchase goods and services at PayPal.
This is confirmed in their TOS that state:
As described in more detail below, here are some things you can do with the Cryptocurrencies Hub:
Buy Crypto Assets;
Hold Crypto Assets;
Sell Crypto Assets; and
View market information and educational content.
The following 4 assets can be purchased with the new service:
Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.I took a look at their new
TOS for cryptocurrencies to understand precisely what rights and benefits crypto holders have. What follows are the most important parts.
To read more about what Skrill offers its customers, please take a look at my other topic titled:
A Deeper Look into the Skrill cryptocurrency TOS.
Who is this service for?- Only citizens of the United States and its territories can access the new service that Paypal calls
Cryptocurrencies Hub.
- The service can’t be used by residents of Hawaii.
US customers may have to pay taxes on the profits they make after they sell/convert their crypto back to fiat.
PayPal users are not the owners of the coins! PayPal and their
service provider Paxos always remains in the custody of your crypto. That means that users have no private keys or seeds. It’s a custodial service, similar to centralized crypto exchanges.
We keep a record of your interest in that omnibus account based on the amount of each type of Crypto Asset that is reflected in your balance. You do not own any specific, identifiable, Crypto Asset.
The purchased crypto can’t be withdrawn or sent to other wallets or users of PayPal. If you want to close your crypto hub, all purchased cryptocurrencies have to be sold before.
This is the part of their TOS that explain this:
You currently are NOT able to send Crypto Assets to family or friends, use Crypto Assets to pay for goods or services, or withdraw Crypto Assets from your Cryptocurrencies Hub to an external cryptocurrency wallet. If you want to withdraw the value from your Cryptocurrencies Hub you will need to sell your Crypto Assets and withdraw the cash proceeds from their sale.
What payment methods can be used to buy cryptocurrencies with?- You can use everything except
credit cards. You can use your PayPal balance, bank accounts, or debit cards.
There are some interesting points to note concerning the buying and selling of crypto. Since the price of coins fluctuates, users have a limited timeframe to buy/sell. This is pretty standard, nothing unusual here. If the transaction is not completed in time, PayPal will offer an updated price.
This is where it gets a bit interesting. When you want to buy crypto, this is what Paypal says in their TOS:
The updated price you see may be much higher than a price that just expired.
Apparently, the price can get higher, but can it also go lower? 😊
When it is time to sell your coins, here is the part of the TOS that mentions the price:
The updated price you see may be much lower than a price that just expired.
Is there any chance of the price to be higher? 😉
PayPal FeesThe amount that PayPal makes and the exchange rate provided may be different than what you would pay on other cryptocurrency platforms.
In other words, you will pay more than what you would spend on cryptocurrency exchanges. PayPal will charge you a margin fee + additional fees when you buy or sell your coins. The fees depend on the amount you are buying or selling. They are between 1.50% – 2.30%.
The rates are available below. I also took a screenshot of the page for a better overview.
https://www.paypal.com/us/webapps/mpp/paypal-fees#CryptocurrenciesPayPal will make money every time you buy or sell your crypto, but the amounts remain a secret.
We will not separately calculate or disclose the spread we earn on each transaction.
- If a cryptocurrency undergoes a fork, PayPal may or may not support the forked coins. If such an event happens, the TOS state that they can suspend all trading activities around that coin. You won’t be able to hold PayPal accountable for any losses you make concerning the forked coins.
- PayPal has the right to limit how much you can buy or sell. The standard weekly limit is $10.000, and the yearly is $50.000. PayPal can change these limits for your account.
- In case PayPal has reasons to believe that you have done something illegal, you should know that you are agreeing to the following terms:
You authorize PayPal to seize your Crypto Assets if we believe a transaction relating to those Crypto Assets involves money laundering, terrorist financing, fraud or any other type of crime.
- PayPal can choose to sell a user’s cryptocurrencies if that user has a negative balance in his PayPal account. (I am not sure how you can have a negative PayPal balance, but OK). In such a situation, PayPal can sell an amount of your crypto that is equivalent to what you owe PayPal.
If the balance in your Cash Account (including your Cryptocurrencies Hub) becomes negative for any reason, that negative balance represents an amount that you owe to PayPal. In addition to any rights we have under the PayPal Cash and PayPal Cash Plus Terms and Conditions, you authorize PayPal to sell your Crypto Assets and use the proceeds to pay a negative balance you owe to us in any PayPal account you own.[/b]