PayPal users will not have the option to withdraw their bitcoin funds to an external wallet. Bitcoin will remain in the PayPal wallet without sending it to other accounts.
PayPal announced this Wednesday that its users now can 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 freedom that users will have.
The first detail is that PayPal customers will not have private keys to 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.”
Therefore, they say that the control of funds by the company is 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.
In addition to the impossibility of controlling the keys, it is not possible to transfer funds, 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 neither 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 (a balance that will be converted into fiat for businesses).
PayPal customers in the United States will be the first to have the service, which will happen in the coming weeks. Then, an expansion to other markets is planned and, in early 2021, it will be possible to buy using cryptocurrency balance in PayPal affiliated stores.
Bitcoin community questions the adoption of bitcoin in PayPal: “not your keys, not your bitcoins.”
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 withdrawing 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 offers will not even really be bitcoin or another cryptocurrency: “it doesn’t matter; they are just issuing promissory notes. After all, they would not want people to retreat to a censorship-resistant wallet! ”
Satoshi Labs, the creator of the Trezor hardware wallets, immediately alerted potential users with a phrase deeply rooted in the bitcoin environment: “not your keys, not your bitcoins.”
On this point, there are constant complaints from PayPal users about blocking and freezing of accounts without prior notice, retention of funds, and other inconveniences that limit the use of funds in wallets on the platform. Something that could also happen now with cryptocurrencies.
For his 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.
By: Jenson Nuñez.
