The positive and negative aspects of Paypal entering the cryptocurrency market
The cryptocurrency market has been affected strongly since the announcement of PayPal to join the crypto arena.
Where PayPal has nearly 350 million users and 26 million sellers that provide payment via Paypal, so this means a lot for cryptocurrencies and can be considered a greater expansion of the crypto market.
Bitcoin rose to a new high in 2020, reaching as high as $ 13,200 in the hours following the news of PayPal.
Many cryptocurrency industry experts hailed the move as something great for Bitcoin and the entire cryptocurrency system.
User base:
PayPal 346m +
Bitcoin 187m +This is a big deal.
Estimating how many HODLers of BTC from on-chain forensics is from the incredible work of @glassnode . pic.twitter.com/QlOkZ9WRJZ
- Willy Woo (@woonomic) October 21, 2020
But is it all rosy and positive, and that the combination of Paypal and digital currencies brings only positive things?
Below we will touch upon some of the negative aspects when mixing Paypal with digital currencies:
Digital currencies cannot be withdrawn:
PayPal is known to be a centralized and tight platform for procedures and transactions, and its profit model is highly fee-based.
When announcing PayPal's support for digital currencies, this does not mean opening all doors to it, but Paypal has allocated limited uses where Bitcoin and other digital currencies can be kept in the wallet without the possibility of withdrawing them and the possibility of withdrawing in cash currencies only (the dollar) and when trying to send them to other digital wallets of Paypal There are large fees that will be applied on the transaction.
Meaning that anyone who wants to change currencies or send money to an account in another country will be painfully aware of the foreign currency difference that can reach up to 8% depending on the currency being converted.
OKCoin COO, Jason Lau, pointed out the amount of fees that Paypal has in store:
Paypal's crypto offering has some caveats:
1) Users won't be able to withdraw.
2) Expensive. You have to pay a spread AND fees. pic.twitter.com/zNIyb542rb- Jason Lau (@jasonklau) October 21, 2020
In addition, PayPal will not allow cryptocurrency transfers between different accounts as noted by user Jake Shervinsky:
This is the highlight of the PayPal news for me.
They're not only preventing withdrawals to self-custody, they won't even allow transfers between accounts.
I'd be glad to speak with @PayPal 's legal team about why these restrictions aren't required for regulatory compliance. pic.twitter.com/DIVUqkCkGC
- Jake Chervinsky (@jchervinsky) October 21, 2020
Basically, it can be said that Paypal simulated buying crypto assets on trading platforms such as that provided by the “Robinhood” platform, providing users with exposure to the asset but preventing them from owning it independently.
Shervinsky added, "If you are unable to make digital currency withdrawals for a private digital wallet, and do not keep the keys to your digital currencies, then can it be said that this is Bitcoin?"
Taxes:
Paypal is a company that is fully subject to the laws and regulations in the places in which it operates, so the services of digital currencies that the company will provide will be subject to taxes and initially users in the United States of America will be subject to this, and it happens that America has some of the harshest tax regulations on the planet.
The US Internal Revenue Service (IRS) classifies cryptocurrencies such as Bitcoin as property, not currency, and thus are subject to capital gains taxes.
This means that PayPal users who buy, sell, or spend cryptocurrencies will generate taxable transactions that must be reported.
Example:
If a user bought a smartphone with Bitcoin, for example, he would need to announce the price of the bitcoin he received, the price it was at when it was sold, and pay taxes on any gains that user might have made in addition to VAT on any goods purchased. .
Reporting documents are a minefield and Paypal has already stated that the matter is in the hands of the user, as it told Paypal in this regard by saying:
It is your responsibility to determine which taxes, if any, are applicable to transactions you make with your digital currencies.
In conclusion, it can be said that PayPal will contribute positively to marketing cryptocurrencies to millions of new users, but the defects and what the services provided by Paypal may prevent their use.