PayPal recently announced that they are allowing more of their account holders to buy and hold cryptocurrencies. The announcement appeared in Bitcoin.com, among other publications. Here’s the overview of the announcement:
Paypal CEO Dan Schulman provided new details of the company’s new cryptocurrency service during the Q3 2020 earnings call on Monday. Paypal recently announced that its customers will be able to buy, hold, and sell cryptocurrencies, including bitcoin, directly from their Paypal accounts. Cryptocurrencies in Paypal accounts can also be used to pay for purchases at 28 million stores worldwide.
Regarding Paypal’s recently announced crypto service, the CEO shared: “Our base is very eager for us to offer these capabilities. It really came up very high on their wish list.” He additionally revealed:
We’ve only rolled this out to 10% of our base. We did that a couple of days ago. But our waiting list is 2 to 3 times what our expectations were. We are going to take up our $10,000 limit per day to $15,000 per day based on the demand that we are seeing.
After reading the disclosure agreement on PayPal’s site that you can find here, I really don’t understand the hype. Here are just a couple of items from the disclosure:
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.
This seems to say that I can’t send bitcoin or another cryptocurrency from my PayPal account through Venmo or another method. I can’t buy anything with my crypto balance. I can sell my cryptocurrency, convert it to dollars, and then go buy something.
And then there’s this:
PayPal makes money when you buy and sell Crypto Assets. PayPal will charge a spread (or margin) between the market price we receive from our trading Service Provider and the exchange rate between USD and Crypto Assets displayed to you. The amount that PayPal makes and the exchange rate provided may be different than what you would pay on other cryptocurrency platforms. You will also be charged a fee when you buy or sell Crypto Assets. More information on pricing and fees can be found on the PayPal Fees page.
It makes sense that PayPal needs to charge fees, but how is this different than holding a very volatile foreign currency?
Overview by Sarah Grotta, Director, Merchant Services at Mercator Advisory Group