The news of Paypal launching a service that will enable customers to buy, hold, and sell cryptocurrencies directly from their Paypal accounts has triggered much discussion within the crypto industry. Users will also be able to pay for goods and services at 26 million stores that accept Paypal as a form of payment with the cryptocurrencies in their Paypal accounts.
‘Every Major Bank Is Having a Meeting About How To Support Bitcoin’
Twitter handle “Plan B,” known for his stock-to-flow bitcoin price prediction model, wrote: “Crypto in (the Paypal) account cannot be transferred to other accounts on or off Paypal. So, this is all a big Paypal nothing burger, just entries in a central Paypal database, nothing to do with bitcoin.”
Messari founder Ryan Selkis tweeted: “Finally. Paypal joins the bitcoin space race … 346 million users … 26 million merchants … 20th largest ‘bank’ by deposits. Between them, Square, and Grayscale, it’s safe to assume that all remaining BTC will be hoovered up by public companies.” Recently, Square Inc. announced that it had put 1% of the company’s total asset into bitcoin, worth about million. Grayscale Investments has been scooping up bitcoin, adding billion to its crypto products in Q3.
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Twitter user Vijay Boyapati opined: “It did not escape Paypal’s notice that Square was making a very large fraction of its profit allowing users to trade bitcoin. More and more financial institutions and payment processors will figure this out soon. The fiat on-ramps are getting bigger quickly.”
The crypto industry has largely viewed the news as extremely bullish, sending the price of bitcoin above ,000. Virgin Galactic chairman Chamath Palihapitiya tweeted in response to the Paypal news Wednesday:
Twitter user Hope Freiheit was not impressed by Paypal’s announcement, stating: “They won’t even allow users to withdraw the bitcoin they buy – it’s just a closed platform for speculation, likely with the users getting charged an arm and leg with fees. Bitcoin doesn’t need Paypal.”
Users Cannot Transfer Crypto Out of Paypal
Regulations in the U.S. permit banks to provide cryptocurrency services. The U.S. Office of the Comptroller of the Currency (OCC) has already confirmed that federal banks are allowed to provide cryptocurrency custody services.
Currently, you can only hold the cryptocurrencies that you buy on Paypal in your account. Additionally, the crypto in your account cannot be transferred to other accounts on or off Paypal … You own the crypto you buy on Paypal but will not be provided with a private key.
What do you think about Paypal launching crypto services? Let us know in the comments section below.
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This means every time users buy a good or service from a merchant, Paypal will automatically convert the cryptocurrency to fiat, thereby triggering a taxable obligation for the consumer.
Spending Crypto Is a Taxable Event
After Paypal’s news, every major bank is having a meeting about how to support bitcoin. It’s no longer optional.
Paypal launching cryptocurrency services has given crypto investors much to think about. While many crypto users view the news as extremely bullish, some point out several areas of concern bitcoin investors should be aware of.
Some people questioned the tax implications of spending cryptocurrencies from their Paypal accounts. “Cryptocurrencies like bitcoin are treated as property per IRS rules. This means every time you sell, exchange, or dispose of cryptocurrency to buy something, there’s a taxable event,” Shehan Chandrasekera of Cointracker wrote. Citing that Paypal stated that users “will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees,” he explained:
Some people are concerned about Paypal’s policy to disallow users from transferring cryptocurrencies in or out of its platform. The company detailed:
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