PayPal is finally allowing its users to move their cryptoassets out of its platform. The company announced the capability in October 2020 and June 7 of this year. It will be available to users in the coming weeks. The company also recently obtained a BitLicense from the New York Department of Financial Services, enabling it to conduct virtual currency business activities. Read on to learn more about the new feature. While the company hasn’t revealed a specific date, the company does not rule out a delayed release.
PayPal’s move to allow transfer of cryptoassets off its platform
PayPal is making it easier for its users to transfer cryptocurrency out of its platform, allowing them to send and receive cryptocurrencies without any transaction fees. This move aims to build a more inclusive financial system, and comes at a time when crypto prices have dropped by nearly 60% this year. While PayPal was a major winner during the e-commerce boom, the company has been lagging behind in recent months, losing 54% of its market cap this year. However, it is still a leader in online payment processing and has been expanding its user base for a number of years.
The move to open its platform to digital currencies comes at a time when most companies are beginning to see the benefits of cryptocurrency as a means of payment. While PayPal has been allowing purchases of cryptocurrencies since late 2020, this expansion is a significant step for users who want to transfer their cryptoassets to third-party wallets or exchanges. Earlier, this didn’t happen.
PayPal first began offering crypto in 2020 and later added a feature called Checkout with Crypto that allowed users to make payments with cryptocurrencies at millions of online stores. PayPal has since ramped up its crypto efforts and acquired cryptocurrency security firm Curv in March. Among other moves, PayPal is exploring the possibility of launching its own stablecoin, dubbed PayPal Coin. However, the company did not comment on whether this new feature is coming to other platforms in the future.
Before adding cryptocurrency to PayPal’s platform, users should remember that it charges a network fee to send and receive crypto outside of the platform. The network fee is generated by network congestion and other factors. However, if you’re sending cryptocurrency to another PayPal user, there will be no network fee. Therefore, PayPal encourages its users to use other methods of payment to avoid this fee.
By allowing customers to transfer cryptoassets out of its platform, they’ll be able to trace the cost base of their purchases and thus file their taxes more easily. The Internal Revenue Service has published Notice 2014-21, which outlines what types of crypto are taxable. In general, if you hold and trade crypto, you won’t pay any taxes on it. If you sell your crypto assets, however, you will owe capital gains taxes.
Users who have 200 transactions or a gross payment volume of $20k or more are required to report their bitcoin earnings on 1099-K forms. While these 1099-K forms are generally issued to people who have made more than $20k in transactions with PayPal, it is important to keep records of your bitcoin transactions if you need to file crypto taxes. Account statements and transaction histories contain this information. Moreover, you do not need to keep a private key.
PayPal’s BitLicense
For customers in the U.S., the ability to send crypto with PayPal will be available in the coming weeks. The company has received a BitLicense from the New York Department of Financial Services and will gradually roll out the feature to all eligible customers. Users can also use their existing wallets to send crypto to PayPal. PayPal’s BitLicense allows transfer of crypto to external wallets and is intended to provide users with a secure way to send their coins to a wallet of their choice.
Currently, the company supports four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. In October 2020, it plans to allow users to send their native crypto from their PayPal wallet to external addresses. Customers can send and receive crypto within seconds without paying any network fees or processing fees. PayPal is actively evolving its platform to work better with the crypto ecosystem. This announcement marks a major milestone for the company.
After several years of conditional licensing, PayPal has now been awarded a full BitLicense from the New York Department of Financial Services. PayPal was the first company to obtain a BitLicense when it began trading in crypto. The company started offering crypto in October 2020 and received a conditional BitLicense. PayPal has worked with New York virtual currency firm Paxos to achieve the full BitLicense.
By accepting bitcoin payments, PayPal has streamlined the process of sending crypto to external wallets. Users can transfer crypto from their PayPal accounts to exchanges and hardware wallets in a matter of seconds. With PayPal’s BitLicense, users can now send and receive their crypto to any wallet of their choice. The integration with PayPal is expected to increase the adoption of cryptocurrencies worldwide.
Revenue from payments via the PayPal network rose 8% year-over-year in the first quarter of 2014. Operating income dropped 30% to $711 million. Overall, PayPal reported net income of $509 million and $0.43 earnings per share, a decline of 28% on an adjusted basis. But despite these impressive numbers, PayPal’s revenue growth continued to remain solid. So while it isn’t enough to boost its stock price, it continues to be a great way to invest in cryptocurrency.
In October of 2020, PayPal started offering crypto as a payment option. In March 2021, it announced a new feature called Checkout with Crypto, which lets consumers pay with their cryptocurrency. PayPal is investing in the crypto industry, partnering with cryptocurrency exchange Paxos and acquiring the startup Curv to power its secure wallet. The company is also examining the idea of launching its own stablecoin called PayPal Coin.
PayPal’s foreign currency conversion rate spreads
Whenever you buy products in a foreign country, PayPal converts the price into U.S. dollars. PayPal will charge you a small fee of around 3% to 4% of the total purchase price. This fee can be hidden, and you may not even be aware of it! To avoid this fee, you can choose to pay with a credit card instead. If you have a credit card, your credit card provider will usually display the conversion rate on your statement.
The exchange rate is updated twice daily by PayPal. To determine its exchange rate, it uses the Interbank Exchange Rate, plus a 2.5% spread. Interbank exchange rates vary from minute to minute, so the rate you receive may not be the one you want to use. The rate PayPal uses is cross referenced against the Official reference rates from the European Central Bank. However, the rates may differ by one to six percent.
In addition, the currency conversion fee will go up on November 6, 2020. This means that PayPal will add an additional 4.0% to its exchange rate for transactions in Canadian dollars. In all other currencies, the fee is likely to be higher. As of September 9, 2019, the currency conversion fee for non-Canadian transactions was 3.5%. This increase may increase to 4%, though. If you’re a merchant in Canada, you should consider this change.
While the exchange rate is often more favorable for international payments, it’s important to understand that PayPal’s exchange rate may differ from what you see in your bank. You can also use a calculator to compare the different exchange rates to get an idea of what you’ll pay. If you’re using PayPal to pay a friend, you’ll need to be aware of PayPal’s foreign currency conversion rate spreads.
As you can see, PayPal’s currency conversion rate spreads are not competitive with those of other payment options. In fact, they are so high that many businesses are forced to mark up their prices to avoid paying this fee. Those costs can add up to a substantial portion of a payment. Even for a small amount, $400 for a payment of $10,000 would be prohibitive. It’s also not competitive with a money service business, which offers the same services at cheaper rates.
In addition to PayPal’s high-street exchange rate, CurrencyFair charges a fixed charge of EUR3 per transfer, and adds 0.45% of the Interbank rate. PayPal’s system is so complex and based on so many variables that it can be frustrating for many people. The exchange rate is just 2% round-trip and 1% one-way. These fees are buried in the exchange rate, so they are hidden from most users.
