As cryptocurrency has become more mainstream, new ways to buy and sell it have also popped up. Last year, PayPal started offering it. In April 2021, Venmo, which is owned by PayPal, also added a feature to buy and sell crypto.
Since these are two of the most popular payments apps, being able to use them for crypto purchases is convenient. Unfortunately, there are also a few downsides that make a crypto exchange a better option.
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You can’t move your crypto
When you buy crypto on PayPal or Venmo, you can’t move it off that platform; you can either hold on to it or sell it. PayPal also recently introduced an option to pay with crypto at checkout.
From a security standpoint, this isn’t ideal. A common recommendation is to move any crypto you buy to your own crypto wallets. That way, you’re the one in possession of your assets. It gives you an extra layer of protection in the event that something happens, like:
- The platform where you bought your crypto is hacked.
- The platform decides to freeze your account.
- Someone gets access to your account.
Think about how stressful it would be if PayPal froze your account with $5,000 worth of Bitcoin. You wouldn’t have access to that Bitcoin until PayPal unlocked your account.
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Some people leave their crypto wherever they bought it without issue. Regardless, you should at least have the option to transfer your crypto. Keep in mind that you also can’t send crypto to anyone else if you bought it on PayPal or Venmo.
You can’t lend your crypto
The fact that you can’t get crypto off PayPal and Venmo isn’t just a matter of security. It also takes away an opportunity to make money with your crypto.
Several cryptocurrency exchanges offer lending programs. By lending your crypto, you can earn interest on it. For example, the Gemini exchange allows clients to grow their crypto through its Gemini Earn program. Another option is KuCoin, which offers a peer-to-peer marketplace where crypto owners can earn 25% interest lending out coins.
Lending crypto is an area where you need to be careful and do your due diligence. Not all sites that offer crypto lending are trustworthy. But once again, it’s nice to have the option to do it.
Selection is very limited
PayPal and Venmo both have the same four coins available:
- Bitcoin (BTC)
- Ether (ETH)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
Many popular coins, such as Cardano and Polkadot, are missing. To be fair, PayPal and Venmo are likely targeting new crypto buyers. For those who are dipping their toes in the crypto pool, the coins offered by each app may be enough.
On the other hand, you could quickly find yourself interested in coins that PayPal and Venmo don’t have. That’s why their limited selection is a big disadvantage compared to Coinbase, Gemini, and other cryptocurrency exchanges with dozens of coins.
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Better ways to buy crypto
None of the above means that PayPal and Venmo are horrible apps to use when buying crypto. It’s just that there are better options out there. With the best cryptocurrency exchanges and apps, you get more control, the opportunity to make money lending crypto, and a much wider selection of coins.
So, where should you get your crypto? A major cryptocurrency exchange is a great option. Two of the exchanges mentioned earlier, Coinbase and Gemini, are beginner-friendly and secure. If you’re new to crypto, either is an excellent starting point. They’re also more than enough for more advanced crypto buyers.
It’s not a big deal if you already bought some crypto on either PayPal or Venmo. You can keep what you bought and hopefully watch it increase in value. Just remember that if you’re planning to make cryptocurrencies a serious part of your portfolio, you should buy them through an exchange that gives you full control.
View more information: https://www.fool.com/the-ascent/cryptocurrency/articles/heres-why-you-shouldnt-buy-crypto-with-paypal-or-venmo/