19 2 - What is the process of investing in crypto with PayPal
January 30, 2022
19 1 - What is the process of investing in crypto with PayPal

PayPal Holdings, Inc. is an online money transfer platform that provides financial services to both consumers and businesses in over 200 locations around the world.

The company’s cryptocurrency services were available from 2020. However, in the month of March in 2021 PayPal extended its cryptocurrency offerings through the launch of its “Checkout with Crypto” service. Bitcoin evolution is what you should be looking for.

If you’re a PayPal customer with crypto assets that are located in the US that you can purchase or sell, hold or pay with cryptocurrencies like Bitcoin or Ethereum. However, all transactions are executed with USD (i.e. the cryptocurrency offerings might not be the best option when you want to make use of the fiat currency different from US dollars).

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How can you invest in PayPal?

In order to buy cryptocurrency, you’ll need to go through a single registration procedure.

In order to invest your money in crypto with the PayPal application:

  • Select cryptocurrency in your PayPal dashboard
  • Click the purchase option (PayPal will prompt you to confirm your identity)
  • If you’re still unsure about the cryptocurrency market and PayPal’s services it is possible to read its educational content to know more.

A second thing to keep in mind is that you’re able to hold the cryptocurrencies that you’ve bought through PayPal. It is currently not possible to transfer cryptocurrencies into and out of your PayPal account.

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PayPal also has dollar limits that are maximum for transactions in crypto. There’s a $100k maximum limit for crypto transactions made weekly and there’s no annual limit for purchases that span a 12 month period.

PayPal: Considerations for account custody

Although PayPal claims that you own every cryptocurrency purchased through its platform but it doesn’t provide private keys for these assets. Within the realm of cryptography as well as digital wallets private keys function as access codes that are highly encrypted which provide you with secure access to your crypto assets.

The crypto service Electrum along with Coinbase both provide private keys. These are among two key options that many cryptocurrencies such as Bitcoin use for transactions. The other type is the public key. The name itself suggests that keys that are public are widely known and are typically used to identify for identification purposes.

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The appeal of private keys when investing in cryptocurrency is that as an individual bank account number they shield those assets against being hacked. A public key does not mean that the public has access to your accounts — it only lets PayPal access your cryptocurrency assets to make purchases and trades. This means that should the security of PayPal be breached, it could also affect any cryptocurrency assets it’s got the right to access.

While PayPal provides buyer protection for transactions with cryptocurrency, the no-private key restriction could cause problems for those who wish to have total control over the crypto assets they purchase or sell through PayPal.

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PayPal features for investing in cryptocurrency

Bitcoin and other cryptocurrencies are digital assets that rely on highly secure Blockchain technology. They are also widely employed as payment options for services or goods, however, they’re highly volatile as their prices fluctuate rapidly. PayPal currently offers four different types: Bitcoin (including bitcoin cash) Ethereum, bitcoin cash, and litecoin.

While you’ll not have to pay for fees just for having crypto stored within your PayPal account, it is recommended that you require at least $1 to start. PayPal will also charge the following fees for transactions (these depend on your purchase amount):

  • $1-$24.99 cost of purchase: $0.50 USD
  • Purchase amount of $25-$100: 2.30%
  • $100.01-$200 Purchase amount 2.00%
  • $200.01-$1000.01 the amount to purchase: 1.80%
  • $1000.01plus the purchase price: 1.50%
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If, for instance, you purchased the equivalent of $75 worth of bitcoin, you’ll have to pay the 2.30 percentage asset-based transaction cost. There are additional fees to be paid.

PayPal has a spread fee also known as a margin in relation to the market price it gets via its service providers for trading and its exchange rates that are charged between USD as well as crypto-related assets that are shown to every customer. The company states that the “spread” fee applies to any crypto transaction, which includes the newly launched Checkout with Crypto service.

PayPal will provide the exchange rate in effect as well as the margin (typically 0.50 percent) per transaction, as per its website.

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The fees also apply to personal transactions and transfers in which there is a need for currency conversion. At present, only users located in US and territories (excluding Hawaii) can use PayPal. The US, as well as US territory (excluding Hawaii), can buy, sell or hold cryptocurrency through PayPal.

Do you think PayPal is the right cryptocurrency solution for you?

This is contingent on your preferences. PayPal can be a suitable alternative for existing customers who utilize the platform for cash transfer and other services. No matter if you’re using cash, or cryptocurrency, you’ll be able to store either with no additional fees.

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But be aware that PayPal’s brand new checkout function doesn’t allow payment using cryptocurrencies. The new service will convert the crypto assets you have in your account into US dollars in order to make purchases.

Another thing to bear in your mind is that PayPal has small transaction costs (you might imagine them as miniature commissions) and exchange rates (including spread fees) when you purchase or sell cryptocurrency.

A few other points to consider: PayPal’s range of cryptocurrency options including bitcoin (including bitcoin cash) along with ethereum and litecoin — could be limited to investors who want a larger selection of cryptocurrencies, or other security options such as stock as well as ETFs. If you fit this description check out our selection of the top online brokerages that cater to any type of investor.

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