The recent debacle regarding the major credit card companies turning their backs on bitcoin has many bitcoin investors scratching their heads about available payment options for buying the digital currency. While debit card and bank transfer remain the preferred methods of payment, this excludes the underbanked and the unbanked, who may not have access to bank products by choice or circumstance.
This brings up an important question. Can you still buy bitcoin with PayPal? The answer is both "yes" and "no." Here's why.
PayPal and Bitcoin
PayPal's relationship with bitcoin is largely a contradiction. On one hand, PayPal is an outspoken supporter of the digital currency. Wence Casares, PayPal board member, said in an interview with PayPal President Dan Schulman:
<p><em>"I can imagine a world in which bitcoin becomes a global standard of value - it's the first global and non-political standard of value - coupled with the first global and non-political standard of settlement. That would be super powerful. It doesn't really need a killer application or much payment adoption to become that, but that would change the world as we know it. It would be the biggest leap forward in the democratization of money we've ever seen."</em></p>
PayPal allows their merchants to accept bitcoin as payment via a Braintree integration and has partnerships with Coinbase, BitPay, and GoCoin. PayPal's early acceptance of bitcoin was an essential step in the mainstream acceptance of the coin, setting the stage for the runaway speculation that would define bitcoin in 2017.
This is contrary to the fact that PayPal sees bitcoin as a mean of currency exchange (as one can buy bitcoin with fiat currency and sell it for the same or a different fiat currency). Per PayPal's Acceptable Use Policy, "PayPal may not be used to operate a currency exchange, bureau de change or check cashing business including the sale of bitcoin."
This precludes the notion of using PayPal as a means to buy bitcoin or any altcoin. PayPal's motivation for this is straightforward; in the early days of bitcoin, dishonest actors used PayPal as a means to purchase bitcoin, only to claim they did not receive the "goods" in question and request a chargeback or refund. As bitcoin cannot be forcibly transferred, there was no way to order the return of the goods and the anonymous nature of the coin made it difficult to prove that the buyer received the coin.
To avoid this, PayPal has changed its rules to limit buying to only tangible goods.
Using PayPal to Buy Bitcoin
Knowing this, the short answer to the question of whether you can buy bitcoin with PayPal is "no." The longer answer is "yes," but only in a couple of ways that require some financial gymnastics.
Option one is to buy bitcoin peer-to-peer. You can pay for goods and services (without having to announce what those goods and services are) via the PayPal interface. You can find sellers willing to sell by searching for bitcoin trading groups on services like Meetup. You can also use web-based services such as LocalBitcoins. While PayPal is not a popular purchasing currency on the site, it is likely that you can find a small group of sellers looking to sell their bitcoin in this way. LocalBitcoins, which only works as a matching service between buyers and sellers, allows sellers to set the terms of payment.
Paxful offers a similar service to LocalBitcoin, but is arguably harder to navigate than LocalBitcoins.
Option two is to buy something with PayPal that could be used to buy bitcoin. One way to do this (and the only way to do this if you are a U.S. citizen) is through the exchange VirWox. VirWox uses a workaround that allows users to buy Second Life Lindens, which the exchange will then use to buy bitcoin on the users' behalf. This is an extremely fuzzy area, as you are technically using fiat currency to buy a game currency to buy a different currency. Depending on the legal definition you use, this may be construed as money laundering. However, there have been no significant legal challenges to this service so far and Second Life is large enough that there is a market for the currency away from the game.
Like any other exchange, VirWox requires submitting Know Your Customer vetting and setting up a wallet. Once this is done, you can buy SLL with PayPal, with the intention of buying bitcoin with the SLL.
Citizens of the Bahamas, Bahrain, Botswana, Bulgaria, Chile, Croatia, Estonia, Georgia, Gibraltar, Honduras, Iceland, Indonesia, Italy, Jordan, Kazakhstan, Latvia, Lesotho, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Moldova, Morocco, Mozambique, Oman, Philippines, Romania, San Marino, Saudi Arabia, Senegal, Serbia, Slovakia, Slovenia, United Arab Emirates and Uruguay can also use their PayPal accounts on WirexApp. Since losing its Visa Network backing, Wirex has moved to creating a blockchain-enabled banking platform of its own.
The Bottom Line
While it is a difficult, convoluted process to buy bitcoin with PayPal, it is not impossible. It is not, however, the most direct way to purchase bitcoin, and unless there is a significant reason why you must use PayPal for this purpose, it is likely that you can find a better way to purchase bitcoin.
It is always important when buying or investing in bitcoin and other digital currencies and altcoins to do your research before you make a move. We can help with that. Read Bitcoin Market Journal and learn to invest like a pro!