That’s probably the crypto headline of the year 2020 so far.
PayPal announced at Oct. 21, 2020 the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account, and signaled its plans to significantly increase cryptocurrency’s utility by making it available as a funding source for purchases at its 26 million merchants worldwide.
The plan is mainstreaming digital currencies. Initially PayPal is featuring Bitcoin, Ethereum, Bitcoin Cash and Litecoin. For that purpose has PayPal been granted a first-of-its-kind conditional Bitlicense by the New York State Department of Financial Services (NYDFS).
“The service is enabled in the U.S. through a partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.”
That means, that PayPal is using another company to handle the buying, selling and paying with cryptocurrency. That’s okay, but the problem is that the PayPal users won’t get the private key of their cryptocurrencies. And that’s a huge BUT!
“Not Your Keys, Not Your Coins”.
If you don’t have the private key, you are effectively not in possession of the currency. So it’s in theory not your money and you have to trust someone else to take care of it for you. That’s completely against all crypto ethics and is a no-go!
PayPals announcement goes on: “As part of this offering, PayPal will provide accountholders with educational content to help them understand the cryptocurrency ecosystem, the risks and opportunities related to investing in cryptocurrency, and information on blockchain technology.”
Will they tell their customers the risks, related to not holding the private key of the own cryptocurrencies? Probably not…
The announcement of PayPal is huge for mass adaption, but bad for the individual.
So buying cryptocurrencies with PayPal is not recommended, as you don’t have the private key and won’t be able to send the cryptos to your own wallet (where you have the private key and thus the control over it).
Let’s hope that a lot of people will see through that and will find their way into the rabbit hole and the “real” Bitcoin…