PayPal’s UK customers can now buy, hold and sell cryptocurrencies through their PayPal account. Britain’s the first country outside of America where they’ve enabled this feature of the online payment system.
Details of the new ‘Crypto with PayPal’ service
You can trade the following cryptocurrencies through ‘Crypto with PayPal’:
- Ethereum (ETH)
- Litecoin (LTC)
- Bitcoin (BTC)
- Bitcoin Cash (BTH)
Obviously, you have to have a PayPal account and will be asked to confirm your ID when you click on ‘Buy’ in the Crypto section of the website. And you can start buying crypto to the value of just £1.00, using your debit card or bank account to fund it.
You can only buy, sell and hold cryptoassets using PayPal. At the moment, you can’t use it to buy other goods and services.
There are some other restrictions too:
- You can’t send any crypto to individual family or friends
- You can’t combine your PayPal Crypto Hub assets with other crypto wallets. This means you can’t withdraw or deposit crypto from one into the other.
- After a crypto sale or purchase is authorised, it can’t be cancelled, reversed or changed in any way.
Is it free to trade in Crypto with PayPal?
It’s free to hold cyptocurrency in your PayPal account. But there are transaction and currency conversion fees on any trades you make.
Is Crypto with PayPal regulated?
Crypto, even within the otherwise regulated PayPal, is absolutely not within the bounds of any financial regulatory body.
PayPal’s Cryptocurrency Terms and Conditions clearly state:
“Our Cryptocurrency service is not regulated by the UK Financial Conduct Authority (“FCA”) or the Luxembourg Commission du Surveillance du Secteur Financier (“CSSF”). It is not within the jurisdiction of the UK Financial Ombudsman Service (“FOS”) or the European Consumer Centre (“ECC”) and it is not subject to protection under the UK or Luxembourg Financial Services Compensation Schemes.”
These Ts and Cs came into effect on 23rd August 2021. The document starts with a clear warning about the risks of dealing in cryptoassets:
“Buying and selling Cryptocurrencies is inherently risky and speculative. You could lose the entire amount you have paid as the value of Cryptocurrencies is very volatile and unpredictable. The value of Cryptocurrencies can change a lot, including going up or down significantly in a short amount of time, and it may not be possible to buy or sell them when you want to. It is hard to value Cryptocurrencies reliably. You must only buy the value of Cryptocurrencies which makes sense for your budget and which you can afford to lose.”
Within the Crypto section of PayPal’s website, there’s more information about the risk/reward prospects of cryptoassets for users.
Does this mean that PayPal take care of the tax implications?
Again, PayPal have created a means to an end here, which doesn’t include responsibility for your cryptoassets’ tax liability. Having a PayPal Crypto Hub might help you make money by trading cryptoassets. But you must declare your earnings to HMRC and pay tax accordingly.
Remember that PayPal and other online companies are obliged to give HMRC information about dealings that go through their platforms.
Why are PayPal supporting this kind of transaction?
PayPal has already launched this trading feature in the USA and added the ability to pay participating businesses with cryptoassets. And they’re already looking to replicate this growth in the UK.
PayPal’s Vice President and General Manager of Blockchain, Crypto and Digital Currencies, Jose Fernandez da Ponte, said:
“The pandemic has accelerated digital change and innovation across all aspects of our lives— including the digitisation of money and greater consumer adoption of digital financial services. Our global reach, digital payments expertise, and knowledge of consumer and businesses, combined with rigorous security and compliance controls provides us the unique opportunity, and the responsibility, to help people in the UK to explore cryptocurrency. We are committed to continue working closely with regulators in the UK, and around the world, to offer our support—and meaningfully contribute to shaping the role digital currencies will play in the future of global finance and commerce.”
Using a familiar, established online payment provider gives both accessibility and a certain level of credence to crypto assets. Particularly to people who wouldn’t otherwise consider using cryptocurrencies at all.
Due to their very nature, cryptoassets are consistently described as “volatile” because their value fluctuates widely – with extreme highs and crashes. They’re unregulated around the world and banks seem to be at odds with other cryptocurrency exchanges.
There’s a lot to be wary of.
But they’re definitely not the ‘here today, gone tomorrow’ fad that was first predicted. Cryptoassets exist globally. Variations continue to be created. The fact that established companies like PayPal are investing in ways to integrate this into their offering is a big indicator in itself. They’re not going away. In fact, they may become more universally accepted as a method of payment.
You must make your own decision about any financial investments and get advice from a regulated professional, if necessary. As with any investment, there’s the chance you can lose any money you spend on cryptoassets. So do your research carefully before you dive into a purchase, on any platform. And make sure you meet your full UK tax liability.