PayPal Holdings Inc announced a few days ago it would allow its clients to hold Bitcoin and other cryptocurrencies in its online wallet. The customers can use their crypto to shop online at the 25 million merchants on PayPal’s network. Many Bitcoin and Crypto users view the announcement as highly bullish. However, there are few concerns that every investor must keep an eye on.
‘Every Major Bank Is Having a Meeting About How To Support Bitcoin’
PayPal’s initiatives towards providing services for its customers to buy, hold, and sell cryptocurrencies at the convenience of their app has started many debates within the crypto industry. PayPal users can spend their crypto to source products and services at more than 26 million stores that PayPal supports already.
The Chairman of Virgin Galactic – Chamapth Palihapitiya tweeted in response to the news of PayPal supporting crypto on Wednesday:
The Office of the Comptroller of the Currency (OCC) gave the green light to the national banks and federal savings associations to facilitate cryptocurrency custody services for its customers somewhere in July 2020.
Not long ago, Square Inc. announced that they have decided to allocate 1 percent of the organization assets into Bitcoin that will account closer to US$50 million. Grayscale Investments has been piling up Bitcoins, adding US$1 billion to its portfolio in the third quarter. Ryan Selkis, the founder of Messari tweeted:
Users Cannot Transfer Crypto Out of Paypal
Crypto enthusiasts are concerned about Paypal’s policy on Cryptocurrency transfers. Paypal does not allow users to transfer cryptocurrency in or out of its platform yet.
“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”
Tweets from prominent personalities in the crypto industry gave mixed ideas about PayPal’s policy on Cryptocurrencies.
Spending Crypto Is a Taxable Event
There are many questions arising within the crypto community about the tax implications on the expenditure of cryptocurrencies from one’s Paypal account.
“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 Chandrasekara of Cointracker elaborated.
However, PayPal mentioned clients will be able to convert their selected cryptocurrency balance to fiat currency, with “certainty of value and no incremental fees”. Merchants will have no additional integrations or fees, as all transactions will be settled with fiat currency at their current PayPal rates, the company added.
“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.“