The cryptocurrency market has been affected strongly since the announcement of PayPal joining the crypto arena.

PayPal has nearly 350 million users and 26 million sellers that offer PayPal payments, so this means a lot to cryptocurrencies and can be seen as a bigger expansion of the crypto market.

Bitcoin soared to a new high of 2020 and reached as high as $13,200 in the hours after the PayPal news broke.

Many crypto industry experts hailed the move as a great thing for Bitcoin and the entire crypto system.

user base:
PayPal 346m +
Bitcoin 187AD +

This is a big deal.

Read:PayPal and Venmo are preparing to add the option to buy and sell cryptocurrencies

Estimating the number of HODLers of BTC from on-chain forensics is an amazing work of Tweet embed. pic.twitter.com/QlOkZ9WRJZ

– Willy Woo (woonomic) October 21, 2020

But is it all rosy and positive and that mixing PayPal and cryptocurrency brings only positive things.

Below we will address some of the negative aspects when mixing PayPal with cryptocurrency:

Cryptocurrency cannot be withdrawn:

PayPal is known to be a very centralized and transactional platform, and its profitable model is highly fee based.

When announcing PayPal support for digital currencies, this does not mean opening all doors to it. Rather, 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 only (dollars) and when trying to send them to other digital wallets affiliated with PayPal There are large fees that will apply to the transaction.

Meaning that anyone who wants to change currencies or send money to an account in another country will be painfully familiar with the foreign exchange difference which can be up to 8% depending on the currency being converted.

Read:CTFC commissioner: DeFi derivatives markets are a bad idea

Jason Lau, COO of OKCoin, noted the amount of fees PayPal has in store:

Paypal’s encryption offer has some caveats:

1) Users will not be able to opt out.
2) Expensive. You have to pay the spreads and fees. pic.twitter.com/zNIyb542rb

—Jason Lau (@jasonklau) October 21, 2020

Additionally, PayPal will not allow cryptocurrency transfers between different accounts as noted by user Jake Chervinsky:

This is the highlight of PayPal news for me.

Not only do they prevent withdrawals to self-booking, they will not even allow transfers between accounts.

I would be happy to talk to Tweet embedon why these restrictions are not required for regulatory compliance. pic.twitter.com/DIVUqkCkGC

– Jake Chervinsky (@jchervinsky) October 21, 2020

Essentially, it can be said that PayPal has simulated the purchase of crypto assets on trading platforms like Robinhood, providing users with exposure to the asset but preventing them from owning it independently.

Shervinsky added, “If you cannot make digital currency withdrawals to a private digital wallet, and you do not keep the keys to your digital currencies, can you say that this is Bitcoin?”

Read:The “AAVE” project launches decentralized liquidity pools for enterprises

Taxes:

PayPal is a company that is completely subject to the laws and regulatory provisions in the places in which it operates so the cryptocurrency services that the company will provide will be subject to taxes and primarily users in the United States of America will be subject to it, and America just happens to have some of the toughest tax regulations on the planet.

The US Internal Revenue Service (IRS) classifies cryptocurrencies such as bitcoin as property rather than currency, and are therefore subject to capital gains taxes.

This means that PayPal users who buy, sell or spend cryptocurrency will generate taxable transactions that must be reported.

Example:

If a user buys a smartphone with bitcoin, for example, they’ll need to declare the price of the bitcoin they got, the price it was at when they sold it, and pay taxes on any gains that user might have made plus VAT on any goods purchased .

Reporting documents are a minefield and PayPal has already stated that it is up to the user, telling PayPal in this regard:

It is your responsibility to determine the taxes, if any, applicable to the transactions you make with your digital currencies.

In conclusion, it can be said that PayPal will contribute positively to the marketing of cryptocurrencies to millions of new users, but the flaws and the services provided by PayPal could prevent their use.

Read also:

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PayPal announces allowing its customers to trade bitcoin and cryptocurrencies through the company’s online wallets