PayPal recently announced that they are offering consumers the option of buying, selling, holding and shopping with cryptocurrencies on their platform. While this seems like a promising development in the wider acceptance of crypto, there are some important details that have not been widely reported about this new offering which are important to consider.
For example, the PayPal crypto wallet is designed a bit differently from other coin wallets. Traditionally, crypto wallets provide you with a private key and anonymity that ensure the highest levels of freedom in how you manage your money. PayPal requires your name and your social security number to set up and use an account. They also don’t provide private keys to your crypto wallet, according to their website.
This means that if you are locked out of your crypto wallet for some reason, there is nothing you can do to access your money, since access is controlled by PayPal. It also means that all your personal information is tied to your identity and reported to the US government.
Their website also states that one can’t use crypto as a way to pay or send money on PayPal. You can also only hold the crypto that you buy on PayPal in your account. Additionally, the crypto in your account cannot be transferred to other accounts on or off PayPal.
Another interesting aspect of PayPal’s crypto offering is that it only supports Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC). PayPal partnered with crypto exchange and stablecoin issuer Paxos Trust Company for this launch.
In a podcast interview, Paxos’ CEO stated that both PayPal and Paxos are looking to the Securities and Exchange Commission (SEC) to decide which cryptocurrencies to support. Since the SEC has essentially looked the other way on the four cryptocurrencies being offered by PayPal, they feel most comfortable focusing only on them for now. They believe that any other cryptocurrencies, such as XRP, become questionable in the eyes of the SEC in terms of whether they are considered securities.
While we applaud the effort to expand the reach of crypto, it seems that this offering is an SEC-sanctioned way to control digital coins. All the restrictions mentioned above are all ways that the SEC can exert maximum control over people’s money and establish a precedent that shows how crypto should be regulated across the board, even beyond PayPal. The SEC wants to have the ability to decide which types of digital coins you can use as substitutes for sovereign currency.
This follows a consistent pattern of the SEC using bully tactics in courts, with fines and legal actions to control the crypto industry. Even though their own chairman previously said that cryptocurrency is a not a security, nevertheless their relentless pursuit of genuine crypto projects continues unabated. Just like their courtroom efforts are based on their charter of upholding the interests of the US government first and foremost, so too their efforts at controlling crypto through the medium of PayPal is another vehicle for them to pursue the same regulatory interests.
However, just like there is a legal procedure we are witnessing with the US Presidential elections, so too are crypto projects following legal procedures to defend their interests against unceasing persecution. Sometimes only part of the legal process is publicly viewable, as there are many discussions occurring privately – even with regulatory agencies to resolve disputes amicably.
It is advised that coin buyers remain very wary and vigilant of using any SEC-authorized crypto wallets. They are mirages of freedom. The perceived safety of these offerings comes with a higher price (in sacrificing one’s freedom) than one can imagine.