- PayPal users will not be able to withdraw their bitcoin funds to an external wallet.
- Bitcoins cannot be sent to other Paypal accounts.
PayPal announced this Wednesday that its users will be able to buy, sell and pay with bitcoin and cryptocurrencies from its platform. However, some of the details about the service raise doubts about the handling of funds in bitcoin and the possibilities of use that users will have.
The first detail is that PayPal customers will not have the private keys of their bitcoins, so all funds will be in full custody of the company, as shown in the frequently asked questions section on the platform’s website.
“You own the cryptocurrency you buy at PayPal, but you will not be provided a private key,” the company notes. As a justification, PayPal claims that relying on the private key is “very risky.”
For this reason, Paypal affirms that the control of cryptocurrency funds by the company is basically a security mechanism for users. “If you can enter your account, you will have access to the balance you have of cryptocurrencies,” adds the text.
Added to the impossibility of controlling the keys, is the fact that it is not possible to transfer funds either, both in bitcoin and in the other cryptocurrencies that the service will support: litecoin (LTC), bitcoin cash (BCH) and ether (ETH).
Not only is it not possible to withdraw bitcoins to an external wallet; nor can you send funds to other PayPal accounts. Nor can you directly deposit balance in cryptocurrencies, so everything will happen within the platform. That is, it will only be allowed to go from funds denominated in fiat currency to BTC and vice versa and pay with a balance denominated in cryptocurrency to merchants affiliated to PayPal (balance that will be converted into fiat for businesses).
Bitcoin community questions bitcoin adoption on PayPal
While some see the PayPal news as a good push for large-scale adoption of Bitcoin, there is a lot of skepticism in the bitcoin community. Mainly, personalities of the ecosystem question the nature of custody and the limitation to withdraw funds in cryptocurrencies.
Among those is Jameson Lopp, co-founder of the Casa company. The also creator of the statoshi.info tool initially alerted via Twitter about “not letting PayPal retain your precious bitcoins.”
Then, looking at the characteristics of the service, he concluded that what PayPal will offer will not even really be bitcoin or another cryptocurrency: “it doesn’t matter; they are just issuing promissory notes. After all, they wouldn’t want people to switch to a censorship-resistant wallet! ”
Satoshi Labs, creator of the Trezor hardware wallets, immediately alerted potential users with a phrase deeply rooted in the bitcoiner environment: “not your keys, not your bitcoins.”
On this point, there are constant complaints from PayPal users about blocking and freezing accounts without prior notice, withholding of funds and other inconveniences that limit the use of funds in wallets on this platform. Something that could also happen now with cryptocurrencies.
For her part, Meltem Demirors, from the investment firm CoinShares, considered that this news could be exciting. However, he assured that “it feels like another asset in a banking/payment network”, rather than Bitcoin.
Among the positions in favor, stands out the market analyst Willy Woo, who referred to the matter as something “big.” In particular, he referred to PayPal’s user base of more than 340 million users.