- PayPal will soon start offering cryptocurrency buying, selling, and shopping on its platform
- The news resulted in a huge Bitcoin price spike
- What did we learn from the announcement?
Cryptocurrencies took a major step towards mainstream adoption yesterday as payments giant PayPal revealed that it will soon allow U.S. customers the opportunity to buy, sell, and shop with crypto on its platform. Here are five things we learnt from the announcement.
Four Cryptocurrencies Supported
The PayPal platform will support Bitcoin, Bitcoin Cash, Ethereum, and Litecoin initially. No doubt this will irritate the XRP army, who will doubtless use every opportunity to remind the world how their token should be on the platform at every opportunity.
PayPal Crypto is a Derivative Product
Don’t be fooled into thinking that the PayPal crypto platform will result in you buying actual tokens. What PayPal is offering is a derivative platform, something where you are owning access to the profit/loss/usage of a cryptocurrency without actually owning any of the underlying asset.
For first timers this will be a much safer way of gaining exposure to the crypto markets, but purists will probably stay away.
Not Your Keys, Not Your Crypto
Want to deposit your crypto into your PayPal wallet, or send some out to a friend? Tough. Like Revolut and other similar platforms, the crypto you buy on PayPal has to stay on PayPal, or be spent with one of their merchants.
Because you don’t own your tokens you are at risk of PayPal locking your tokens up in case they suspect you of wrongdoing. Not your keys, not your crypto.
Don’t Forget the Tax!
What might turn out to be a shock to PayPal’s crypto users is that they will have to calculate and log their cryptocurrency gains and losses for their tax return. Selling a cryptocurrency, including spending it at one of PayPal’s 26 million merchants, is a taxable event, which you may end up having to pay capital gains on.
Fortunately for you (and the IRS) PayPal will keep records of all your transactions , so you will have no trouble getting your hands on the data needed to calculate everything in time for tax deadline day. Lucky you.
Sentiment is Bigger Than Reality
Given that the PayPal crypto offer is a derivative product that has all the concomitant pitfalls, it won’t appeal to existing users of cryptocurrencies. However, they weren’t the target market. The target market is those who have been tempted to get into the crypto market but haven’t yet found a safe way of doing so.
Now with PayPal (and soon Venmo) they will be able to with a reputable company. They’re not interested in doing much with it (except maybe buying something with their gains), so a product like this is perfect for normalizing crypto and encouraging new people into the space, which is exactly what it needs.
Doom Mongers Will Point to Crypto Conversion
The launch of a PayPal cryptocurrency platform would be the biggest boost for adoption in many years, perhaps even of all time, with the criticism that ‘you can’t spend cryptocurrency’ suddenly null and void.
Of course, critics will point to the fact that cryptocurrency spent through the PayPal crypto portal will be exchanged into dollars at point of sale, meaning that it is not true acceptance of the payment medium. However, this would be churlish and ignorant of the message behind the development – one of the retail world’s most popular payment processors is expending no little time and money into crypto implementation.
If you’re bearish on that, then you’re too biased to ever be convinced.