Coinbase is allowing U.S. users to buy crypto with their PayPal accounts in a major expansion of the exchange’s funding rails.
It could cost unwitting users substantial sums in fees.
Coinbase users are now able to buy up to $25,000 in crypto daily using PayPal, according to the exchange’s settings page. They’ll lose nearly 4% of such purchases to PayPal-specific fees.
The PayPal integration becomes a third big-spender option alongside bank buys (also $25,000 daily) and wire transfers, which have no cap. Needing only the login to set up, it could offer users a workaround to Coinbase’s cumbersome linking process for credit and debit cards ($5,000 weekly) and bank accounts.
But Coinbase, already notorious in some circles for its high fees, could stand to reap massive returns from users who pay with PayPal without paying attention to the difference.
Buying crypto through PayPal ranks among Coinbase’s priciest payment options. The 3.99% fee is just as expensive as debit card buys despite having a far higher limit. And it is markedly higher than bank buy fees of 1.49%. Depositing USD from PayPal into Coinbase triggers a 2.5% levy; ACH transfers are free.
For example, a CoinDesk reporter previewed $25,000 AAVE buys on Coinbase using every available funding option. Choosing PayPal, the order would have triggered $959 in fees Wednesday night. (The reporter’s PayPal account is funded by his debit card.) Paying with the bank account tied to that same debit card would cost $367 in fees, for comparison. Paying with the debit card itself would not have worked because of the $5,000 weekly cap.
(The reporter did not execute either purchase. He did, however, buy $5 in AAVE Wednesday to test the PayPal feature and lost 99 cents to fees.)
Coinbase has provided U.S. customers with PayPal sell functions since 2016 and withdrawal capabilities since late 2018. It expanded the option to much of Europe two months later. Cash withdrawals are live in the U.S., U.K., EU and Canada.
Coinbase said in a blog post it plans to expand the PayPal buying feature to “more countries” in the months ahead.