It’s official – PayPal’s UK customers can now buy Bitcoin, Ethereum and two other cryptocurrencies directly through their accounts.
Alongside the ability to quickly purchase the digital currencies, you can also sell your coins through the platform and use it to store your crypto assets.
The move, announced last month after a successful trial in the United States, has gradually been rolled-out across the UK where users have seen a new ‘Crypto’ tab appear on both PayPal’s desktop and mobile apps.
Here’s a step-by-step guide to buying Bitcoin through PayPal and a review of the service, including the pros and cons. (Note: this guide assumes you already have a PayPal account set up).
How do I buy Bitcoin through my PayPal account?
If you’ve logged into your PayPal account recently, you’ll have probably spotted the addition of a new ‘Crypto’ tab nestled among the main account options.
Clicking this will take you to a very minimalist screen showing your current crypto balance and details of the four coins currently available: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC).
Here, you’ll also find a list of useful guides for beginners to help people understand what cryptocurrency is and assess the risks involved in investing in the asset class.
Education was one of the core messages pushed out by the payments giant when it announced it would be offering cryptocurrency and it’s clear they’ve stuck to their word.
To buy your first coins, click the cryptocurrency you’re interested in and you’ll be taken to another screen showing the current market price of the coin and its performance.
As you can see, underneath the price graph is a big blue ‘buy’ button, below which are a choice of some present amounts (such as £20, £50 etc). You can ignore these if you wish and choose your own amount, starting from just £1.
It’s worth mentioning here that being able to buy such as small amount of crypto is unusual but doesn’t necessarily make economic sense when you consider the fees involved, which we’ll get on to later.
Once you’ve selected the amount of crypto you wish to buy, a pop-up will appear asking you to select a funding source to make your purchase with.
This can be a bank account or debit card, both of which you’ll probably already have set up with PayPal if you’re an existing user. Otherwise, you can simply add your card details at this point.
Once you’ve selected your funding source, you’re presented with a warning message highlighting some of the risks involved in buying cryptocurrency (such as volatility), the tax consequences and the fact that the cryptocurrency market isn’t regulated and your funds are not protected by the UK’s Financial Services Compensation Scheme.
This is just a formality designed to keep the Financial Conduct Authority happy so don’t be alarmed.
Once you’ve agreed to the terms a new screen will pop up headed ‘Review and buy’ as shown below.
This gives you up-to-the minute transaction details including the amount of crypto you’re buying, the current market rate and the transaction fee involved in the purchase.
You can still cancel the deal at this stage, especially if you feel the market is changing rapidly which can happen in the world of crypto.
You’ll notice your purchase amount changing ever few seconds as the market moves (either up or down).
This is handy because it means you’ll know exactly how much crypto you’re buying at any given moment.
IMPORTANT NOTE: Crypto transactions are irreversible so make sure you’re happy to proceed and understand the risks before completing your purchase.
If you’re happy with everything you see, click ‘Agree and Buy’ and your transaction will be submitted.
You’ll then be shown the final settlement details after which you can return to the ‘Crypto’ tab at any point to see an overview of your current balance.
And that’s it! You’ve now bought crypto through your PayPal account.
What are PayPal’s fees and how do they compare to Coinbase and Binance?
Like other crypto exchanges, PayPal makes its money from charging a spread or margin (the difference between the market price they receive and the exchange rate they offer to you) and a fee.
PayPal’s fees are:
Taking a £20 purchase as an example, PayPal would charge 50p for the transaction while the Coinbase fee was £1.49 at the time of writing.
One slight difference between the two services is that PayPal adds the fee on top, bringing the total transaction cost to £20.50, while Coinbase deducts the fee, giving you £18.51 worth of crypto.
As we mentioned earlier, you can buy as little as £1 worth of crypto if you want, but PayPal will charge you 50p for the privilege, which clearly isn’t the most economical way of buying!
At the time of writing, Coinbase’s fees vary depending on the payment method you’re using and whether you’re using its standard service or ‘Pro’ platform.
With Coinbase, it’s much cheaper if you transfer cash from your bank and use that to make a purchase, rather than using your debit card.
You can make further savings if you use Coinbase Pro, which is free but is more complex than the standard platform and requires a basic understanding of trading screens and setting market/limit orders.
If you think you’ll be buying or selling crypto on a regular basis it’s worth taking the time to familiarise yourself with trading platforms as you’ll save a considerable amount of money over the long term.
Binance, another popular global trading platform, also offers significant savings on fees compared to PayPal or the standard Coinbase platform yet is even more complicated to use.
However, it does give you access to a wide range of altcoins and offers users the ability to stake applicable coins and earn interest on their holdings together with a raft of other features for the more sophisticated crypto investor.
For beginners who don’t wish to delve into trading screens just yet, PayPal is considerably cheaper than Coinbase and offers a simplicity that surpasses that of Coinbase’s already minimalist platform.
Should I worry about Bitcoin volatility and large price movements?
Don’t be alarmed by large swings in the value of your crypto (as highlighted by the warning page).
Bitcoin and cryptocurrencies in general are notoriously volatile and can rise and fall in value quite significantly several times a day.
This is the nature of investing in cryptocurrency at this present time. The more you buy and sell coins the more familiar this will become.
Of course, if you fancy yourself as a bit of a trader, you’ll be looking to use this to your advantage by selling high and buying the dip.
However, timing the market is notoriously difficult and unless you know exactly what you’re doing, or are prepared to lose money, it’s best to avoid this at the start of your crypto journey.
Selling your cryptocurrency through PayPal follows a similar pattern as above and is a seamless process, with the funds being credited to your account instantly.
It’s important to note that one service that isn’t currently offered by PayPal is the ability to send your crypto to someone else which some people may find restrictive.
PayPal versus Coinbase – which is best for beginners?
There are number of factors to consider and both platforms have their strengths and weaknesses.
Coinbase gives you access to a much wider range of cryptos and allows you to send coins to any crypto address (and receive them) while PayPal is limited to just four coins at present and you can only hold them in your accounting or sell them.
Yet PayPal is cheaper than Coinbase and the platform is incredibly slick and easy to use, enabling even complete novices to buy crypto within a matter of minutes. PayPal definitely scoops first prize for offering the simplest way of buying Bitcoin.
Many people will already have a PayPal account meaning they won’t have to go through the formal sign-up process with Coinbase (or other platforms), including AML/KYC checks, another advantage for many who want to get there first taste of Bitcoin without too much complexity.
Coinbase Pro and Binance (together with the dozens of other trading platforms out there) offer much greater functionality and access to the broader crypto market making them more appealing to anyone wanting to dabble more extensively in the cryptosphere.
What next for PayPal’s cryptocurrency offering?
Currently, PayPal’s service feels very limited, and the current restrictions on what you can do with your coins once you’ve bought them will put some people off.
Afterall, not being able to pay for things using your crypto, or even send coins to someone else mostly defeats the point of buying it in the first place, unless you’re doing so purely for investment purposes and wish to ‘hodl’ (hold your coins in the hope of future price appreciation).
However, all this may change in the future as there are plans afoot to add additional functionality to the crypto aspect of its service.
For example, a ‘Checkout with Crypto’ function is already being tested in the US. This enables customers to spend their coins with millions of businesses by automatically converting the right amount of crypto into fiat currency to pay for goods or services.
If successful, it will no doubt find its way across the pond at some point.
PayPal has also been working on a so-called ‘super app’, according to TechCrunch, which promises a plethora of new features, including advanced budgeting tools, subscription management, a pay later function and – you guessed it – extended capabilities for its cryptocurrency offering.
Whether this includes the freedom to send your crypto to others (and receive it as well) remains to be seen, but it’s highly likely that this will be implemented at some point.
Will PayPal’s move lead to greater use of cryptocurrencies and price increases?
PayPal’s decision to offer crypto is potential huge for the market and could see large scale uptake of Bitcoin and cryptocurrency in general.
Millions of people are already long-time users of the app and see it as a trusted internet ‘old timer’ which they’re already familiar with.
It also means that people who, for whatever reason would not have otherwise been exposed to crypto, can now purchase coins at the click of a couple of buttons.
Cryptocurrency’s association with PayPal also adds a greater sense of legitimacy and trust to digital currencies in general and brings them well and truly into the mainstream.
This in turn has the potential to lead to a future increase in the price of Bitcoin and other cryptocurrencies as more individuals and companies grab their share of the crypto pie.
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).