Last week, Paypal announced plans to let users withdraw cryptocurrency to third-party wallets!
Speaking at CoinDesk’s Consensus 2021 conference, Jose Fernandez da Ponte, General Manager of Blockchain, Crypto & Digital Currencies at PayPal stated:
“We want to make it as open as possible, and we want to give choice to our consumers, something that will let them pay in any way they want to pay. They want to bring their crypto to us so they can use it in commerce, and we want them to be able to take the crypto they acquired with us and take it to the destination of their choice.”
At present, PayPal does not let users move cryptocurrency holdings off-platform, though it has let customers buy bitcoin and other cryptocurrencies since October 2020. At this time, we released a blog article expressing some key safety concerns that PayPal users needed to be aware of before using the service to buy, hold, and sell cryptocurrency.
The major concern was that, without the withdrawal feature, at no point in time would you actually own a cryptocurrency asset purchased via your PayPal account. It would be held in an omnibus account through PayPal’s custodial Service Provider, meaning you wouldn’t have access to the asset itself.
This setup is similar to that of a centralised cryptocurrency exchange in that they issue an ‘IOU’ for the assets purchased through them, however PayPal did not allow its users to then withdraw those assets. This meant users would be unable to move purchased assets away from PayPal to a secure and privately owned wallet. The only way to extract the value from your crypto purchase on PayPal would be to sell it on their platform back to fiat.
With the news that a withdrawal function is in the works, PayPal users will soon be able to move their assets onto a secure hardware wallet. A Hardware Wallet is a physical device, similar to a USB stick, that holds your crypto private keys offline, eliminating the risk of malware, keyloggers, computer viruses, or other risks that software wallets and exchanges are vulnerable to. Keeping your private keys offline through cold storage is the most secure way to manage your cryptocurrencies.
No data has been announced in terms of when the withdrawal feature will go live on Paypal, but Ponte also confirmed that the move to allow customers to move Bitcoin and other cryptocurrencies to third party services will also apply to the platform’s popular mobile payments service Venmo.
As always, we will keep you updated as these changes roll out. If you have any questions, you can get in touch with us at support@coinstop.com.au