What are the potential side effects of corporations selling fake crypto?

[20kevin20]

Where you said that it can’t be withdrawn from their platform, I think the right word to use there is that you can’t send and receive. You can actually withdraw it on their platform and that’s by converting it to US dollar or any currency, before you can then send the money out or withdraw to bank.

What they do is that they don’t allow people to send out cryptocurrencies and you can’t also receive cryptocurrencies, unless you’re using their merchant services, you can then receive cryptocurrencies, but you still can’t send them out. And we can’t tell whether the coins we are buying are real or not. It’s up to you to decide whether you’re going to trust them or not, and if you happen not to trust them you can start making use of another exchange or wallet .

If you "withdraw" to USD, it's converting to fiat.. not withdrawing. Withdrawing is what you have mentioned in your second paragraph.


Thanks to you all for your replies; quite interesting to see how many out there trust their guts with PayPal without ever questioning what they're actually selling or... if they're even selling anything. As some users here mentioned, if PayPal does not let you withdraw your coins, it means it is possible that they are not even selling you anything at all!

I'll take one hypothetical scenario: say a 3-letter agency decides to work with a large corporation on a plan to destroy the cryptocurrency economy. If we're talking a hypothetical collab between an agency and a corporation such as a bank, I'm quite sure the destruction of crypto economies is at the best interest for both parties.

3-letter agencies are known to doing classified operations that are in their interest; why would a fiat-threatening economy that they simply cannot control be let alone?

Therefore, the question is.. how hard is it really to sell a currency that does not exist? You pay me $47k in my personal wallet and I hand you out a piece of paper having "1 BTC" written on it. How do you know whether your 1 BTC truly exists or I sold you nothing for $47k?

This is a potentially threatening issue we may be confronting without even knowing it. I still find the ways Revolut and PayPal work as suspicious, but the fact that so many people really trust them and their way of "selling BTC" is very interesting to me.

I wish I could merit some posts, but I always remain out of merits and I already owe so many people some. Interesting read this topic is.

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[Betwrong]

At first, reading that one couldn't withdraw their BTC from PayPal, I thought "That couldn't be true!". But then I checked their official FAQ, and I saw these two things there:

Can I transfer Cryptocurrency into and 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.[/b]

Will I get a private key for the Cryptocurrency I buy on PayPal?

You own the Cryptocurrency you buy on PayPal but will not be provided with a private key.

Well, now I understand some concerns.

But let's discuss the following. If they were selling fake BTC to their customers on PayPal, wouldn't that affect the BTC price negatively, because a part of the demand would be covered by fake coins? Yet, the opposite is happening - the price is going up.

[posi]

At first, reading that one couldn't withdraw their BTC from PayPal, I thought "That couldn't be true!". But then I checked their official FAQ, and I saw these two things there:

Can I transfer Cryptocurrency into and 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.[/b]

Will I get a private key for the Cryptocurrency I buy on PayPal?

You own the Cryptocurrency you buy on PayPal but will not be provided with a private key.

Well, now I understand some concerns.

But let's discuss the following. If they were selling fake BTC to their customers on PayPal, wouldn't that affect the BTC price negatively, because a part of the demand would be covered by fake coins? Yet, the opposite is happening - the price is going up.

I think you can say PayPal is offering cryptocurrency service just like the OTC but the only difference is that people can not withdraw or deposit their coins. Technically, they can sell fake coin but they know the consequences they will face by the SEC so they won't do that but there's the possibility that price of the market not to influence or be intact with the capital market price and circulation since they seem to offer OTC market and OTC price are always mute to life market.

[Ucy]

They literally just inflate their assets by essentially borrowing your funds in exchange of an 'agreement' that they are holding something for you. If they cannot provide withdrawals for 'your crypto' that you bought from them, there probably isn't one to begin with. While I do agree that PayPal taking part in the crypto scene is bringing things closer to people, it also has its own demerits, especially the one that people aren't able to actually hold their coins. The experience is very limited to just buying and selling right now, though I hope that PayPal would soon provide actual withdrawals for their customers to get the full experience of being a bitcoin owner through the simplicity offered by PayPal's platform.

The strange practice of not letting customers withdraw their coins sound worst than using fiat currencies on traditional banks. Atleast the banks allow people to withdraw their funds inform of physical currency like paper. Guess people will simply convert the "crypto" to fiat and withdraw them physically if they can't withdraw them to their crypto wallets outside of PayPal space.
By the way, this one the the reasons people should be suspicious of cashless economy, especially on centralized platforms.

[oHnK]

By the way, this one the the reasons people should be suspicious of cashless economy, especially on centralized platforms.

Yes, a full cashless centralized economy is very dangerous for individuals because there is no freedom for personal finances, whatever we have will be intervened by the authorities. The current Paypal policy is quite strange and there will be many suspicions from users of the platform if it is not immediately clarified. I'm sure, Paypal will change this policy until the many complaints that come to them.

[South Park]

What paypal is doing is simply a version of what derivatives and CFD exchanges offer.

I personally think that this will not necessarily have a great impact on markets - Paypal would still have to comply with certain regulations that require them to hedge their positions, meaning that they can't simply create positions out of thin air to manipulate the market.

But at the same time, I am worried that people will miss the point of cryptocurrencies altogether - it is not primarily designed to be a speculative vehicle. But the way that Paypal and others are framing it eliminates the underlying technology of blockchain altogether, meaning that BTC is no longer transactional. That should be worrying but we can't do anything to stop private companies from offering these products.

Unfortunately I think this is the greatest threat of services like that, they are framing bitcoin not as this revolutionary technology that is here to bring back some power back to the people, they are framing bitcoin in a way that makes it seem as yet another asset in which you can speculate in, obviously people like us know what's up but most people that only hear about bitcoin in the news only know about its price and how it can bring them profit but it is unlikely they know what it is and what is its function.

[Betwrong]

~

I think you can say PayPal is offering cryptocurrency service just like the OTC but the only difference is that people can not withdraw or deposit their coins. Technically, they can sell fake coin but they know the consequences they will face by the SEC so they won't do that ~

Even if SEC wasn't a threat, selling fake BTC would put PayPal  at risk of a big loss. What would you do, if people bought millions fake BTC on your platform, and then the price rises by 100%, and they want to exchange them back to USD? If BTC in your customers' accounts were backed by real BTC then no problem, you could sell BTC on the market at the high price and provide your customers with USD, but if they("BTC") were fake you would have to pay out the dividends from your own pocket,  which could lead to bankruptcy.

[posi]

~

I think you can say PayPal is offering cryptocurrency service just like the OTC but the only difference is that people can not withdraw or deposit their coins. Technically, they can sell fake coin but they know the consequences they will face by the SEC so they won't do that ~

Even if SEC wasn't a threat, selling fake BTC would put PayPal  at risk of a big loss. What would you do, if people bought millions fake BTC on your platform, and then the price rises by 100%, and they want to exchange them back to USD? If BTC in your customers' accounts were backed by real BTC then no problem, you could sell BTC on the market at the high price and provide your customers with USD, but if they("BTC") were fake you would have to pay out the dividends from your own pocket,  which could lead to bankruptcy.

You make a good point but I believe they will have everything sorted out before they can plan to sell fake BTC (that's if they do just like USDT does) since they are also aware of the volatility of the market which I believe they can handle properly and they have to partner with Paxos (which handle the crypto while Paypal handles the fiat).

[aioc]

PayPal has started selling "crypto" but they don't let you withdraw. Hence, if you think about it, they could easily only literally sell numbers on a screen rather than a math-backed, miner-verified real cryptocurrency.

I was wondering what could happen from an economical point of view if they (or any other corporation) did this and suddenly wanted to manipulate markets using false coins. What could PayPal do to BTC?

How can they manipulate something that is not part of the blockchain, their transaction is just their make up, with numbers not real I don't know how are they going to do that or are they capable of doing this, people might think it's illegal because it's not part of the blockchain or explorer but this is PayPal, which is a centralize corporation trying to be part of decentralized technology.

[South Park]

PayPal has started selling "crypto" but they don't let you withdraw. Hence, if you think about it, they could easily only literally sell numbers on a screen rather than a math-backed, miner-verified real cryptocurrency.

I was wondering what could happen from an economical point of view if they (or any other corporation) did this and suddenly wanted to manipulate markets using false coins. What could PayPal do to BTC?

How can they manipulate something that is not part of the blockchain, their transaction is just their make up, with numbers not real I don't know how are they going to do that or are they capable of doing this, people might think it's illegal because it's not part of the blockchain or explorer but this is PayPal, which is a centralize corporation trying to be part of decentralized technology.

In principle it is the same that they to do gold, we know there is a limited supply of gold but governments increase the supply of ‘gold’ by selling paper gold, which is nothing but a piece of paper that supposedly represents real gold but that is not backed by it, this keeps the price of gold depressed as there is way more paper gold than real gold, if governments and businesses like PayPal begin to offer paper bitcoin that you can never withdraw but that tracks the price of bitcoin then they can increase the supply and slowdown the growth of the price of bitcoin as people buy it as if it is the real thing and artificially increases its supply.

[Betwrong]

~
Even if SEC wasn't a threat, selling fake BTC would put PayPal  at risk of a big loss. What would you do, if people bought millions fake BTC on your platform, and then the price rises by 100%, and they want to exchange them back to USD? If BTC in your customers' accounts were backed by real BTC then no problem, you could sell BTC on the market at the high price and provide your customers with USD, but if they("BTC") were fake you would have to pay out the dividends from your own pocket,  which could lead to bankruptcy.

You make a good point but I believe they will have everything sorted out before they can plan to sell fake BTC (that's if they do just like USDT does) since they are also aware of the volatility of the market which I believe they can handle properly and they have to partner with Paxos (which handle the crypto while Paypal handles the fiat).

You mean, they might be short selling those fake BTC, knowing that they can manipulate the market to make the price go down? That's an interesting point, but does PayPal have resources to manipulate a market with $1 trillion cap? I personally don't think so.

[20kevin20]

You mean, they might be short selling those fake BTC, knowing that they can manipulate the market to make the price go down? That's an interesting point, but does PayPal have resources to manipulate a market with $1 trillion cap? I personally don't think so.

If they were willing to manipulate markets using real BTC, market cap would not matter at all. Liquidity is pretty much the main factor that matters when it comes to influencing markets. But if they wanted to manipulate markets using counterfeit (non-existent) BTC, all they have to do is just take off the limit for BTC purchases/sales. At that point, there is an infinite counterfeit BTC going in and out of PayPal's system making Bitcoin's scarcity artificially vanish.

[Mahanton]

~
Even if SEC wasn't a threat, selling fake BTC would put PayPal  at risk of a big loss. What would you do, if people bought millions fake BTC on your platform, and then the price rises by 100%, and they want to exchange them back to USD? If BTC in your customers' accounts were backed by real BTC then no problem, you could sell BTC on the market at the high price and provide your customers with USD, but if they("BTC") were fake you would have to pay out the dividends from your own pocket,  which could lead to bankruptcy.

You make a good point but I believe they will have everything sorted out before they can plan to sell fake BTC (that's if they do just like USDT does) since they are also aware of the volatility of the market which I believe they can handle properly and they have to partner with Paxos (which handle the crypto while Paypal handles the fiat).

You mean, they might be short selling those fake BTC, knowing that they can manipulate the market to make the price go down? That's an interesting point, but does PayPal have resources to manipulate a market with $1 trillion cap? I personally don't think so.

This is true! When it comes to manipulation side of things then the ownership of a certain company or industry wont really be that enough when it comes to manipulation of prices.
Unless if this do talk about several numbers of big holders then with some involvement of unknown whales which do held more than coins than them that could possibly
change off the entire one.We cant really tell on what could possibly happen behind the curtains but knowing that they can do all sort of things as long they would able
to benefit them.About manipulation then they can do it but wont really be giving out significant effect.

[Ucy]

By the way, this one the the reasons people should be suspicious of cashless economy, especially on centralized platforms.

Yes, a full cashless centralized economy is very dangerous for individuals because there is no freedom for personal finances, whatever we have will be intervened by the authorities. The current Paypal policy is quite strange and there will be many suspicions from users of the platform if it is not immediately clarified. I'm sure, Paypal will change this policy until the many complaints that come to them.

Ofcourse.
It shouldn't be "full cashless" though. People should have the right to own physical currencies whether on centralized or decentralized system. There are lots of benefit in the use of physical currency for society. Virtual currency could easily leave a society vulnerable to tyranny for example.

Anyway, I don't believe every society will go full cashless. It will be imposed on others or they will be decieved into accepting it.

[posi]

~
Even if SEC wasn't a threat, selling fake BTC would put PayPal  at risk of a big loss. What would you do, if people bought millions fake BTC on your platform, and then the price rises by 100%, and they want to exchange them back to USD? If BTC in your customers' accounts were backed by real BTC then no problem, you could sell BTC on the market at the high price and provide your customers with USD, but if they("BTC") were fake you would have to pay out the dividends from your own pocket,  which could lead to bankruptcy.

You make a good point but I believe they will have everything sorted out before they can plan to sell fake BTC (that's if they do just like USDT does) since they are also aware of the volatility of the market which I believe they can handle properly and they have to partner with Paxos (which handle the crypto while Paypal handles the fiat).

You mean, they might be short selling those fake BTC, knowing that they can manipulate the market to make the price go down? That's an interesting point, but does PayPal have resources to manipulate a market with $1 trillion cap? I personally don't think so.

This is true! When it comes to manipulation side of things then the ownership of a certain company or industry wont really be that enough when it comes to manipulation of prices.
Unless if this do talk about several numbers of big holders then with some involvement of unknown whales which do held more than coins than them that could possibly
change off the entire one.We cant really tell on what could possibly happen behind the curtains but knowing that they can do all sort of things as long they would able
to benefit them.About manipulation then they can do it but wont really be giving out significant effect.

I also agreed that the PayPal company can't possibly manipulate a trillion dollars market but I was actually talking about the moment when the market hasn't reach $30,000 price if you follow rumors within the cryptocurrency communities (on this forum, Reddit, etc) some people believe Paypal's trading activities impact the dump in price that happens then.

[vintages]

RobinHood App (they are not actually giving to the poor, quite the opposite) does that too.

The way it works they are printing endless money because people give them $$$ and in return just receive a number in the app.

This money they can loan or hedge out. Like if they have $1bn of virtual bitcoin they would only need to use a small percentage
of that to back it up in case everyone wants to sell suddenly and pull it out.

Banks work this way too, they only have 2% or 3% reserves of the actual money people have in their accounts.

The worst can happen RobinHood gamble away the customer funds and cant pay you out anymore.

The best advice is to not support these systems because you only own your bitcoin if you own your keys.  

Whoa!
I am kinda hearing this for the first time. I know this system do exist, but I never knew it existed with PayPal. And to think with all the difficulties of using them, they could offer this type of service is surprising.
I can understand if this happens with fiat, but with Bitcoin, why would anyone want to even do that? This is way too risky.

[Betwrong]

You mean, they might be short selling those fake BTC, knowing that they can manipulate the market to make the price go down? That's an interesting point, but does PayPal have resources to manipulate a market with $1 trillion cap? I personally don't think so.

If they were willing to manipulate markets using real BTC, market cap would not matter at all. Liquidity is pretty much the main factor that matters when it comes to influencing markets. But if they wanted to manipulate markets using counterfeit (non-existent) BTC, all they have to do is just take off the limit for BTC purchases/sales. At that point, there is an infinite counterfeit BTC going in and out of PayPal's system making Bitcoin's scarcity artificially vanish.

Ok, but what would they(PayPal) do if people on their platform decided to exchange those fake "BTC" to USD? USD isn't fake on PayPal, right? You can withdraw it, unlike BTC, which you can't. PayPal would be obliged to pay real USD for fake BTC they created. That's why I think it's an unrealistic scenario.

~
I also agreed that the PayPal company can't possibly manipulate a trillion dollars market but I was actually talking about the moment when the market hasn't reach $30,000 price if you follow rumors within the cryptocurrency communities (on this forum, Reddit, etc) some people believe Paypal's trading activities impact the dump in price that happens then.

Yes, there can be an effect, but only a short-living one. I think Bitcoin is so strong today that no company, whatever they do, can manipulate its price for a long term.

[Ucy]

If you see how Paypal sells their Crypto service, it seems as if this is part of a scam. Another possibility is that these are only the initial stages of maintenance which are still in progress. As long as no one feels cheated by their services, there is no accurate evidence regarding the fake crypto they are selling. The data is that Paypal users still feel safe and secure with the services provided by Paypal so that's enough so far.

PayPal is one of the most trusted payment processor out there, and it has been in existence since 1998. They operate as per US laws, and therefore the users don't need to worry that someone will take their money and vanish (similar to a lot many small sized exchanges have done in the cryptocurrency sector). The user functionality is limited right now, but I hope they will make full functions available to the users in the near future. For those who use exchanges such as Huobi and Kraken, there should be no issue in using PayPal. The risk involved is the same.

I think whatever law a cryptocurrency company follows should be in harmony with the good ideals/principles of true Cryptocurrency otherwise it could result to future problems for a decentralized cryptocurrency Network/System.

[semobo]

What else other than feeling the scam but this is going to end the career of those companies no matter how big they are so I believe their will never sell the fake numbers which apply to the exchanges as well. In this case Paypal is not selling anything they just act as a gateway to exchange so they will get the fiat then the exchange will hold the cryptos for them and this happens while buying or selling from a customer.

[Mauser]

PayPal has started selling "crypto" but they don't let you withdraw. Hence, if you think about it, they could easily only literally sell numbers on a screen rather than a math-backed, miner-verified real cryptocurrency.

I was wondering what could happen from an economical point of view if they (or any other corporation) did this and suddenly wanted to manipulate markets using false coins. What could PayPal do to BTC?

The first thing that is likely going to happen to these fake currencies is that value will drop drastically. Even if corporations will try to rescue their cryptos they won't be able to fight the whole market. This could be the end for the hole company if they are not careful. Keeping fake currencies a float is very expensive and doesn't work long term.