Is buying crypto on PayPal a good idea?

In November 2020, PayPal announced that all account holders in the US would be able to buy and sell cryptocurrencies including Bitcoin through its platform. The news followed its announcement in October 2020 that it would introduce options for cryptocurrency buying and selling, through a partnership with Paxos Crypto Brokerage.

PayPal will allow purchases of Bitcoin, Ethereum, Bitcoin Cash, and Litecoin within the PayPal digital wallet. "We are pleased to announce that all eligible PayPal accountholders in the U.S. can now buy, hold and sell cryptocurrency directly with PayPal," the company said in a brief statement, which added that users in the United States will soon able to use cryptocurrencies to buy products from its 26 million merchants worldwide. Payments will be converted into fiat at the point of sale.

To exchange Bitcoin, visit: bitcoin to Paypal

In the first half of 2021, the features will roll out to "select international markets."

How to buy Bitcoin using PayPal

First things first: You need to set up a PayPal account, obviously. If you don’t have one, you’ll need to set one up with your credit card or bank account and an email address, at PayPal.

Now it’s time to buy some BTC. The experience is broadly similar across the PayPal website and the PayPal app; for this walkthrough, we're using the website. On the homescreen (the “Payments” screen in the app) select the “Buy Bitcoin and more” banner, displayed toward the top of the page.

Next, select the cryptocurrency you wish to buy. Currently the options to buy and sell on PayPal are Bitcoin, Ethereum, Bitcoin Cash, or Litecoin. Additionally, PayPal has provided resources to learn about cryptocurrency; it also lists the risks involved.

You can select a preset amount of Bitcoin to purchase, or tap “Buy” to select an amount of your choice. The minimum users can buy is little as $1.00 worth of Bitcoin. Below the purchase option, PayPal includes a brief description of the asset being purchased.

Before you can continue, you will need to confirm some information and agree to PayPal’s Cryptocurrencies Terms and Conditions.

Next comes the fun part: buying Bitcoin. Enter the amount you'd like to buy (in this case, $10). A helpful note explains that the price of Bitcoin varies depending on when you pull the trigger: “Exchange rate includes a spread and refreshes frequently until you buy or sell.” Select Next to move on to the next screen.

The bank account or credit/debit card your PayPal account is associated with appears. You can add other cards or bank accounts, at this point, too.

After selecting “Next,” review your purchase. The transaction fees on PayPal are fairly reasonable for consumer-facing exchanges; the fees range from 50 cents for purchases under $25, to 1.5% of the transaction for purchases over $1,000. Select “Buy Now” when you’re ready to purchase.

After the purchase is complete, the account will be updated to reflect the amount of crypto purchased and the current value.

Return to the home page and see your Bitcoin purchase under "crypto" with the option to buy and sell.

Cryptocurrency sold through the PayPal app or website will be converted into fiat and will show in the Cash Account balance section of the user’s account. PayPal has included its fee chart and conversion spread for users to determine how much in fees they can potentially incur.

Buying Bitcoin on other sites using PayPal

It's worth noting that PayPal restricts users to holding crypto on its platform; it can't (yet) be transferred out of PayPal's digital wallet, other than to make purchases (at which point it's converted into fiat at the point of sale). Per PayPal's terms and conditions, "the crypto in your account cannot be transferred to other accounts on or off PayPal."

While that holds true at launch, it's unclear whether that feature will be added to at a later date—or what the impact will be on other services that enable crypto buying and selling through PayPal.

For many Bitcoin advocates, PayPal's crypto offering is antithetical to the very ideals that underpin Bitcoin; namely, the idea that Bitcoin holders are their own bank.

If you want to use PayPal to buy Bitcoin from other sources such as exchanges, in order to retain full ownership of your Bitcoin, your options are limited; relatively few sites support it as a payment method.