There is a lot of excitement regarding the PayPal – cryptocurrency news. To a lot of people, this serves as a validation of the success and appeal of Bitcoin. At the same time, it is crucial to keep the limitations and drawbacks in mind too.
PayPal and Bitcoin are an odd mix
For years, people have looked at PayPal and Bitcoin as competing payment solutions. It is true that PayPal is far more commonly sued. Its payment service is one of the top online payment solutions in the world. This is, in part, thanks to its early integration into eBay. Even though both companies are now separate entities, accepting transactions over PayPal’s network remains incredibly easy.
Bitcoin, as a payment method, is a very different creature. It empowers users, requires no middlemen or bank support, and is more “global” by default. At the same time, it has not gotten anywhere near PayPal’s level in terms of traction and appeal. This doesn’t make one better than the other, but it shows there is a lot of work to be done.
Rather than continually opposing one another, PayPal is now incorporating Bitcoin “support” an interesting idea, as it can bring cryptocurrency to more people globally. However, this service will not work in the way most people think. That too, is to be expected.
PayPal cannot actively control the flow of Bitcoin’s network or aid it in a direct manner. All it can do is introduce custodial solutions, and ones with very limited functionality to boot.
What you can and Can’t do
On the surface, PayPal’s mission is to facilitate the buying and selling Bitcoin. A welcome addition, and one that can have some interesting consequences. However, this is not the actual “cryptocurrency” one is buying. Instead, it is an approach similar to Robinhood, where users have a Bitcoin “balance”, but can’t effectively use BTC in any meaningful way.
As things stand, users can only hold cryptocurrency purchased through PayPal in their account. It is not possible to transfer these currencies. Not to other Paypal users, nor to one’s own cryptocurrency wallet. A severe shortcoming that puts a damper on the current approach explored by the payment processing company.
CoinCorner CEO Danny Scott adds:
“PayPal is currently only offering this service to the US and by the sounds of the functionality, it’s very basic, meaning that it’s a closed loop – aka, you can’t withdraw your Bitcoin and use it elsewhere, or send your Bitcoin from outside of PayPal into their system.
The announcement is still great news, however, as it shows a positive step forward for the industry, and brings yet more credibility to Bitcoin and its future.”
That makes this entire concept a lot less attractive all of a sudden. Square initially went down the same route, but now allows for limited self-custody. It will be interesting to see if PayPal ever decides to go down a similar route. For now, its Bitcoin “functionality” isn’t too appealing.
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