Should You Use PayPal to Purchase Bitcoin?

Last week PayPal launched cryptocurrency trading and payments in the United States. Customers in the U.S. can now buy, hold, and sell certain cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash and Litecoin) from within their PayPal accounts. Next year, PayPal will also allow users to make PayPal purchases using cryptocurrency, and will expand it’s crypto services globally.

This is HUGE news for cryptocurrency in terms of global adoption. In the second quarter of 2020, there were 346 million active PayPal accounts worldwide. Most of these users have probably never considered getting into cryptocurrency before but will now have a simple way to do so thanks to Paypal. The crypto market capitalisation also surged by $25 billion following the announcement.

There are however some key safety concerns that PayPal users should be aware of before using this service to buy, hold, and sell cryptocurrency.


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At no point in time will you actually own a cryptocurrency asset purchased via your PayPal account. It will be held in an omnibus account through PayPal’s custodial Service Provider, meaning you won’t have access to the asset itself.

The set up is similar to that of a centralised cryptocurrency exchange in that they issue an ‘IOU’ for the assets purchased through them, however PayPal does not allow it’s users to then withdraw those assets. This means users will 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. The company’s Terms and Conditions page states:

If you want to withdraw the value from your Cryptocurrencies Hub you will need to sell your Crypto Assets and withdraw the cash proceeds from their sale.”


As mentioned earlier, millions of people will potentially be introduced to cryptocurrency thanks to PayPal. Whilst PayPal have stated they intend to provide account holders with educational content to help them understand the cryptocurrency ecosystem”, we have to question whether they are the right people for the job. 

Anyone who has been in the crypto space for a while knows of the importance of owning your own private keys. But given that PayPal will not allow its users to withdraw their cryptocurrency to the safety of a privately owned hardware wallet, their educational content may just skip over the fundamental rule that is “not your keys, not your coins”.


The validity of the cryptocurrency transactions on PayPal is questionable given they are not taking place on the blockchain. Whilst they are obliged to hold a 1:1 ratio of the cryptocurrencies their users purchase, there is no on chain transaction relating to that particular purchase. All PayPal is doing is providing a front end user interface that shows you have ‘bought’ some cryptocurrency.

If you can’t make withdrawals, and don’t hold your own keys, is it even cryptocurrency?


Whilst we can’t deny that PayPal’s move into the cryptocurrency space is huge news in terms of adoption, it does remove some of the fundamental properties that make Bitcoin so special, and that makes us a little concerned. There’s still a lot more news to come from this space and we’ll be sure to keep you updated as things develop.

Would you buy your Bitcoin from PayPal? 

Let us know over on our social channels.