Paypal – the online payment processor recently introduced the limited facility to buy and sell cryptocurrency on it’s platform on Oct 21. Though initially made available for US users and offering only Bitcoin, Ethereum Cash, Bitcoin Cash and Litecoin cryptocurrencies. Despite the crypto-community rejoicing over the news to increase adoption, legitimacy and usage. There were concerns raised on the nature of the Paypal service and the company’s history.
Unfortunately, it appears that some of those concerns were true. A Reddit user “thecooldoc” posted r/CryptoCurrency about it’s disheartening experience with the Paypal crypto service. According to the user, he attempted to trade the recent crypto dip on the platform’s native service. The counter-party: Paypal. It appears however that PayPal’s own system doesn’t realize the high frequency crypto buying and selling, instead flagging it as suspicious for “selling items worth $10,000 in a week”.
PayPal Block First, Ask Questions Later Approach
Of course, that isn’t exactly what was happening. So, the user tried to submit a few documents for the review and wrote “PayPal Crypto” on each document, hoping that the review team would understand. He tried to contact the service to no avail. Later, his account was permanently limited without any explanation. The user insisted that the PayPal customer service remains highly inconsiderate and ignorant of the matter. And once your account is banned, nothing much be done.
It demonstrates a very dangerous approach from PayPal on these matters. Day-trading is a common feature of cryptocurrency and users trade often trying to make profit. This includes rapid execution of buy and sell orders for a given asset. However, the PayPal system doesn’t recognize that and treats it as the same as items sold, when it’s simply trading. Further, besides the painful support and non-existent review process, PayPal can put the account on hold and seize funds.
The Dark Side Of PayPal Service
But that’s not all. PayPal is a custodial service and users don’t have any control over their purchased crypto, since they don’t have the private keys. For now, there is nothing much to do on the platform, since you can only buy and sell crypto that too only to PayPal. Your funds can’t be used to pay for any goods or services, a problem which will be rectified by 2021 according to the company.
They will also not allow you to withdraw crypto to an external wallet or transfer it to your friend’s PayPal crypto wallet even. This is a sort of open prison structure, where users are given an illusion of control, while in reality, they have none yet. PayPal doesn’t charge any fees, but claims to benefit from margin or spread from the provider, they acquire or dequire crypto from.