PayPal Cryptocurrency Review (2021)

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PayPal Cryptocurrency Review
  • Beginner Friendly
  • Payment Methods
  • Speed
  • Fees
  • Functionality
3.8

Summary

You can now easily and quickly buy and sell cryptocurrencies from within your PayPal account in the UK.

However, it’s lacking important functionality in the UK. You cannot currently withdraw crypto from your PayPal account to an external wallet, or deposit crypto from an external source into your PayPal account.

You’ll be charged fees of at least 2% when you buy or sell cryptocurrencies on PayPal, but it can be higher than that for smaller transactions.

Check out the link below for a list of fully functional alternatives (some of which are cheaper) where you can buy Bitcoin (BTC) in the UK.

On 17th September 2021, PayPal finished rolling out a new feature to UK users that enables you to buy, sell, and store cryptocurrency inside your PayPal account.

But is it any good?

Read my full PayPal cryptocurrency review to find out.

How Does PayPal’s Crypto Feature Work?

There’s no doubt: PayPal has made it quick and painless to buy Bitcoin (BTC) and other cryptocurrencies in the UK.

Check out this short video (1m 30s) for an overview of how it works.

If you already have a PayPal account, you can buy Bitcoin (BTC) and other cryptocurrencies in just a few minutes. That’s awesome.

Unfortunately, this convenience comes bundled with some serious limitations.

Keep reading for more on this.

Guide: How to Buy Bitcoin (BTC) on PayPal in the UK

You’ll need to create a PayPal account and verify your identity (by providing details about yourself and identification) before you can buy or sell cryptocurrencies on PayPal in the UK.

Click to expand any of these images.

  • Login to your account and head to the ‘Crypto’ tab.
  • Select Bitcoin (BTC).

  • Click on ‘Buy’.

  • Enter how much Bitcoin (BTC) you want to buy.
  • Select ‘Next’.

  • Choose how you want to pay for this transaction. I selected my PayPal balance, but you can also pull money directly from a bank account or debit card.
  • Click ‘Next’.

  • You’ll be asked to review and agree to some terms and conditions.
  • You should then see a box with all the purchase details. This shows you the exchange rate you’re being charged (for comparison) and the transaction fee (which is added on top of the purchase amount).
  • If you’re happy, then select ‘Agree and Buy’.

  • You’re done! After a few moments, you should see your Bitcoin (BTC) balance in the Crypto tab. You’ll also see the combined value of your crypto balance on the PayPal summary page.

Who has PayPal partnered with to provide this functionality?

PayPal is working in partnership with the Paxos Trust Company to provide eligible PayPal users with the ability to buy, sell, and store cryptocurrencies inside of their PayPal accounts.

Supported Cryptocurrencies

PayPal currently allows you to buy, sell, and hold the following cryptocurrencies in the UK:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
Will PayPal add any other cryptocurrencies?

There’s no news on this from PayPal yet.

However…

PayPal’s new cryptocurrency functionality is powered by Paxos Trust Company. The cryptocurrencies supported by PayPal is probably limited to what is offered by the Paxos Crypto Brokerage.

This currently includes:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
  • PAX Gold (PAXG) 
Will PayPal support forked cryptocurrencies?

In short, this seems like it’ll be decided on a case-by-case basis by PayPal.

If PayPal decides not to support a forked cryptocurrency, then you might not ever be credited with any of the value that these forked cryptocurrencies have.

Payment Methods

You can deposit GBP into your PayPal account by transferring GBP using a UK bank transfer (via Faster Payments) or a debit card.

Deposits I’ve made with a UK bank transfer into PayPal have been credited within a minute or two (but it can sometimes take days).

I haven’t been charged anything by PayPal to use these two payment methods. See here for a bit more information.

Supported Countries

PayPal’s cryptocurrency features have NOT been rolled out to every country where you can open an account.

It’s currently only available to users who are residents in the following countries:

  • United Kingdom
  • United States (excluding Hawaii)
Will PayPal be rolling this functionality out in other countries?

According to PayPal’s Cryptocurrency FAQ (on both the UK and US sites) and a PayPal spokesperson, it is planning to roll out this functionality in other global markets “in the coming years”.

Cryptocurrency Fees

You’ll pay an explicit transaction fee when buying or selling cryptocurrency on PayPal. You’ll also be quoted exchange rates that don’t match up with current prices on popular cryptocurrency exchanges (i.e., the mid-market rate).

The transaction fee you’re charged depends on how much cryptocurrency you’re buying or selling:

AmountTransaction Fee
£1.00 – £24.99£0.50
£25.00 – £100.002.30%
£100.01 - £200.002.00%
£200.01 - £1000.001.80%
> £1000.011.50%

Because of how PayPal currently processes cryptocurrency transactions in the UK, a behind-the-scenes conversion takes place from GBP to USD. Some margin might be included in this exchange rate.

The USD to crypto exchange rate you’re quoted should also include a 0.50% fee (but it could be more).

Put all this together and it means that you’ll pay at least 2% in fees when buying or selling cryptocurrency on PayPal.

But if you make smaller purchases/sales, it can work out substantially more expensive.

Example 1: You’d be charged about 5.5% in fees if you bought £10 worth of Bitcoin (BTC) in the UK.
Example 2: You’d be charged about 2.8% in fees if you bought £100 worth of Bitcoin (BTC) in the UK.

This is NOT the lowest-cost method of buying Bitcoin (BTC) in the UK. For alternatives, check out this list of some of my favourite places.

Cryptocurrency Limits

 I’ve been told by a PayPal spokesperson that:

  • You can buy or sell up to £15,000 per transaction.
  • The weekly limit for cryptocurrency purchases is £15,000.

No monthly or annual limits were confirmed.

Cryptocurrency Wallets

The cryptocurrency that you have in your PayPal account is pooled with the cryptocurrency that other people are storing in their PayPal accounts. Cryptocurrencies aren’t held by PayPal – instead, they’re being custodied by its partner (Paxos).

In the UK, you cannot currently:

  • Send cryptocurrencies to other people using PayPal.
  • Use what cryptocurrency you’ve bought on PayPal to pay merchants.
  • Withdraw anything to an external cryptocurrency wallet.
  • Deposit cryptocurrencies into your PayPal account from somewhere else.

I think this is awful.

You’ll be 100% locked into their platform and won’t be able to do…well, anything with the cryptocurrency you buy using PayPal.

Will PayPal allow you to withdraw or spend Bitcoin (BTC) in the future?

PayPal’s US launch of crypto features gives us some clues.

PayPal’s cryptocurrency functionality was initially launched in the United States in October 2020. Since April 2021, Venmo (owned by PayPal) has provided the same functionality to users in the United States too.

From March 2021, PayPal launched ‘Checkout with Crypto’ in the US too. This allows PayPal customers to use select their cryptocurrency holdings in PayPal when paying for something. Although the merchant won’t be paid in crypto (as it’s converted into fiat on-demand), I still think this is a decent feature.

In May 2021, it was also reported that PayPal was planning to enable withdrawals to external wallets in the future. However, there’s doesn’t seem to be a timeline for this.

Summary: It Could Be Better

Here’s the bottom line of what I think:

While PayPal’s cryptocurrency hub is perfect for those who want to dip their toes into crypto, it’s missing some critical functionality.

You can’t do anything with the cryptocurrency you buy on PayPal. Most importantly, you can’t withdraw cryptocurrencies to an external wallet (i.e., take self-custody). You’re locked inside their ecosystem.

And when there’s such a wide selection of alternatives in the UK that DO provide this functionality, why should we settle for less?

Until this changes, I won’t be using it.

Alternatives to Buying Crypto on PayPal

Here are some easy-to-use alternatives to PayPal’s cryptocurrency hub:

  • CoinJar: Deposit GBP with a UK bank transfer or use a credit/debit card to buy Bitcoin (BTC) and a growing number of other cryptocurrencies (25+). Find out more in my CoinJar review.
  • Luno: Has a great mobile but doesn’t support many cryptocurrencies – just Bitcoin (BTC) and 5 others. You can deposit GBP with a UK bank transfer or use a credit/debit card. Find out more in my Luno review.
  • Coinbase: One of the largest and most popular cryptocurrency platforms in the world. Allows you to buy Bitcoin (BTC) and dozens of other cryptocurrencies in the UK. Find out everything you need to know in my Coinbase review.

 And if you’re looking for the cheapest way to buy Bitcoin (BTC) in the UK? Check out this post.

Anything to Add?

Thanks for checking out this PayPal cryptocurrency review!

Have a question about this feature? Or want to voice your thoughts about it?

Let me know in the comments section below!

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