Do You Own Your Cryptocurrency on WealthSimple and PayPal?

What Does it Mean to Own Your Cryptocurrency?

Before we dive into whether or not you own your cryptocurrency on WealthSimple and PayPal, we need to define ownership. The key (pun intended) factor that determines whether or not you own your bitcoin, is whether or not you have access to your private key. If you haven’t heard the mantra spouted by crypto enthusiasts, you will hear it now. “Not Your Keys, Not Your Crypto”.

At the end of the day, the private key allows you to access, and move your cryptocurrency. Every exchange aside from Decentralized Exchanges (DEXs) do not give you access to your private keys. This is because transactions that take place on the blockchain “on-chain” are too slow, to handle the high volume required to operate a cryptocurrency exchange. Exchanges are able to accomplish a high volume of transactions by maintaining an internal database of user balances. Exchanges do however, allow you to withdraw your cryptocurrency, and move it into a wallet where you control the keys. So while exchanges don’t allow you to own your crypto directly, they give you the ability to do so by taking your assets off their platform.

WealthSimple is an Investment Service, Not an Exchange

We can now answer the question that we started with. Do you own the crypto that you buy on WealthSimple? From my perspective, the answer is no. I take this position for two reasons. The first is that WealthSimple does not give you access to the private keys that correspond with your balance on their platform. The second is that WealthSimple does not allow you to withdraw the cryptocurrency acquired from their platform. In short, WealthSimple allows you to invest in Bitcoin or Ethereum, but not own the asset directly.

I don’t actually have a problem with WealthSimple taking this approach with their business. They give services to a particular niche of investors. Not everyone cares to learn about private key management, and which crypto wallet is the best. WealthSimple does one thing really well, and that is that they simplify investments for their customers. More people will be exposed to cryptocurrency as a result of WealthSimple adding this as a service offering. If this is the first way that some are exposed to crypto, this is a net positive for crypto adoption. When people are ready to take the next step on their crypto journey, they will be free to explore a plethora of other exchanges that allow withdrawals to take place.

PayPal is a Money Transfer Service, Not an Exchange

Just like WealthSimple, PayPal too will not allow users of the platform to withdraw their cryptocurrency into a non-custodial wallet. However, the story for PayPal is a little bit different, so let’s dig in. The news of PayPal’s entrance into the crypto world is still pretty fresh. The rumor hit mainstream in June, and was later confirmed at the end of Q3. While PayPal has likely been planning this new service offering for some time, their business touches many parts of the world. Adding the ability for users to transact with cryptocurrency is a huge step in the direction of their business. This transition is likely to be rolled out in stages.

The first stage of the offering is simply to do what PayPal does best. Transfer money around the world. Allow their users to hold, and transact with the currency of their choice. Once again however, they will not allow their users to withdraw their cryptocurrency. It does however look like this is on their roadmap. The latest rumour from PayPal is that it is in talks with crypto custodian service BitGo. This is really good news for PayPal users for two reasons. The first is that it gives confidence to the public that there is real bitcoin behind their purchase. It is reasonable to be skeptical of this fact if it is the case that you cannot withdraw your crypto. There is no way to know for sure whether or not the bitcoin you buy through PayPal is actually sitting in a PayPal vault.

PayPal Still Very Positive for Crypto in General

Once again, I think PayPal adding cryptocurrency to their platform is a net positive for the crypto industry. Right now, using the definition of ownership outlined above, I wouldn’t say you own your crypto on PayPal. However, it does appears that they are heading in the direction of definitively holding cryptocurrencies. This is indicated by their conversations with crypto custodians.

Users exposed to cryptocurrency through PayPal will no doubt begin to learn about other ways to engage in the world of crypto. If they choose to take a more direct ownership approach, they can seek out the best exchange that works for them.

Non-Crypto Companies Go Crypto

This trend of companies that did not originate from a crypto background is likely to continue. One major example of this is Michael Saylors’ MicroStrategy. Since their major acquisition of $425 worth of Bitcoin, they have opted to support the crypto industry in a number of ways.

For example, the company is now supporting the salary of one Bitcoin Core developer. They’ve also launched their own education portal for learning about bitcoin on their website. The most positive thing that can be said about these non-crypto companies entering the industry is that this will add new perspectives and innovations to the space. Until now, cryptocurrency has largely been a niche investment opportunity, or fringe money experiment. The more companies that decide to get into cryptocurrency, the more rich and vibrant the industry at large is bound to be.