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| Bitcoins that you buy through PayPal are not actually yours |
Buying Bitcoin has become easier than ever. However, be careful about the platform you choose as you may not have the cryptocurrency to buy.
Take PayPal, for example: Digital payment companies have made great strides in encryption over the past year.
The platform now allows US users to buy, sell, hold and pay using cryptocurrencies such as Bitcoin, Ethereum, Bitcoin Cash and Litecoin.
You can invest money in digital currencies without opening a special account for trading cryptocurrencies.
Technically, however, the cryptocurrency you bought is not yours, because PayPal is responsible for operating the wallet, which means you don't own Bitcoin.
Usually when you buy Bitcoin, you are given public and private keys to officially own the property. The public key is the address of your wallet and the private key is used to control the wallet.
You can access public addresses with PayPal, but the company controls the private keys.
In the "Frequently Asked Questions about In-App Cryptocurrency" section, the company clarified that it is not possible to transfer the cryptocurrency in your account to other accounts via PayPal or outside it.
With currency being an asset that you own, that sounds like a strange warning.
This type of restriction is similar to the one that comes with depositing US dollar coins into a US bank because you believe the US bank has money in its bank account and give you a signature document to confirm the advance amount.
This means that customers cannot transfer bitcoins to storage or wallets outside the PayPal system.
Although a user's ability to use digital currencies is very limited from a business perspective, it makes sense for PayPal.
This limitation greatly reduces the potential problems known as "Know Your Customers" and "Anti-Money Laundering Financial Services Guidelines". Some large companies encounter these issues when managing live broadcasts that are not on their platforms.
In addition, not all customers may want to take responsibility for protecting their cryptocurrency because losing public and private keys means losing the currency.
If you are new to coding and are not sure whether you want to keep the public and private keys, then using this method may be safer to authorize PayPal.
For example, the former Ripple Technical Director lost his private key and $ 400 million Bitcoin in today's prices.
As with any centralized exchange, you are exposed to certain risks because the central platform is inherently vulnerable to threats that can affect the entire user network.
Metric tons. Gox was once the main platform and the first major hack in the history of cryptocurrency. The platform filed for bankruptcy. In addition to 100 Bitcoins, 750,000 Bitcoins were lost by users.
Pale changed his mind at once, but regulations remain an obstacle there as the Treasury Department proposed a new knowledge of your customer requirement in December that forced companies like PayPal to link user identities to crypto wallets. Especially the central platform for the governor.