For crypto enthusiasts across the world, traditional exchanges like Coinbase, Binance and Kraken have long been the go-to platforms for the buying and selling of digital assets for fiat currencies. These online destinations have facilitated much of the crypto trading that has been undertaken since the digital currency market went mainstream in the late 2010s, with the total tracked crypto exchange reserves now estimated to stand at a massive $269 billion. However, following fintech giant PayPal’s recent arrival on the scene following their announcement in 2024 to begin allowing the buying, holding and selling of cryptocurrency, it appears as though the market dynamics may be shifting. Considering this, let’s compare PayPal to the more traditional crypto exchanges. What are the advantages and limitations of each and importantly, how does this impact the user experience.
PayPal
Advantages
While PayPal are certainly new to the crypto exchange scene, they have been industry leaders in the financial technology sector since emerging at the dawn of the millennium. This experience and expertise will no doubt serve them well as they move into the world of crypto. First and foremost, as an established global payments provider, PayPal immediately possesses a recognizable brand that customers trust especially when compared to the lesser-known names of traditional crypto exchanges.
Furthermore, with a well-developed digital ecosystem, PayPal are famed for their user-friendly interfaces, designed for the mainstream market. As crypto continues to imbed itself into the mainstream consciousness, this ease of use could prove vital to capture a user base of non-experts.
With an estimated 45% share of the online payment processing market, PayPal is also intertwined with several other lucrative industries from online retail all the way to iGaming. In fact, the payment service is so imbedded into iGaming that directory Casino.org ranks the top PayPal casinos in Canada to ensure players know which platforms allows players to pay via PayPal. With such as huge market share, it is hard to see how more traditional exchanges could compete as crypto becomes increasingly used.
The final advantage that PayPal has lies in the regulatory compliance the company operates under. With crypto still lying in a legislative no man’s land, traditional exchanges could soon fall foul of stricter financial regulations being put into place by governments. PayPal on the other hand, represents a more risk averse option better place for update legislation.
Limitations
At current, the major limitation of PayPal as a crypto exchange is in the limited number of coins available to trade on its platform. While there are an estimated 11,000 cryptocurrencies out there, PayPal’s exchange only supports Bitcoin, PYUSD, Bitcoin Cash, Ethereum and Litecoin. This severely restricts the investment opportunities available on PayPal with those that use the platform instead of traditional exchanges missing out on the growth potential of non-major coins.
While PayPal’s user-friendly interface and simplicity is a positive in one sense, for more experience traders looking to invest in crypto, the platform just doesn’t have the advanced investment tools required. With such limited trading tools available, users aren’t able to react to market fluctuations and implement risk management strategies to the same degree that you can on sites like Kraken and Coinbase. So, while PayPal’s approach may initially build their user base, as these users become more experienced, they may decide to go elsewhere to boost their investment portfolio.
Traditional Crypto Exchanges
Advantages
On the other end of the spectrum, many of the traditional crypto exchanges are purpose built for crypto trading, providing their users with an abundance of advanced features. These include spot trading which allows users to immediately purchase or sell an asset at current market price and margin trading, enabling users to leverage their investments by borrowing funds in order to potentially achieve higher returns. With these more complex tools, traditional exchanges present a platform with increased profit potential which many more experienced traders will see as a huge benefit.
In addition to this, traditional exchanges offer users the chance to buy hundreds of different digital coins including major currencies as well as alternative and emerging coins. For example, Coinbase supports over 240 different currencies while Binance continues to add new coins to the350+ that is currently offers. With so many currencies on offer, traditional exchanges give users the ability to create a diverse investment portfolio which is important for minimizing risk in what is a volatile market.
The decentralized nature of cryptocurrencies is a key driver for many investors, with the idea of shifting power away from major financial institutions into the hands of the individual a fundamental. Using a fintech leader like PayPal is the antithesis of this, therefore many crypto fans prefer to use smaller decentralized exchanges like Uniswap or Kyber. Traditional exchanges allow users to fully own their own crypto, enabling them to transfer assets from the exchange to personal wallets – something that is harder to do with PayPal.
Limitations
The result of such advanced investment features however, is that many traditional exchanges possess complex interfaces that many users find difficult to use. And while this is not an issue for many experienced investors, it can be difficult for these exchanges to attract new users with little knowledge of digital trading software.
A significant step that is required for many exchanges is to integrate more with traditional commerce and political institutions. Currently, many of these platforms still operate in isolated ecosystems which limits their ability to grow, particularly as crypto becomes more engrained in global finance. There have also been legitimate security concerns raised regarding crypto exchanges following several high-profile cyber-attacks and with suitable regulations still yet to be outlined in many countries, many prefer to use more well-regulated platforms like PayPal.
Choosing between traditional exchanges and PayPal comes down to what you are looking for when it comes to crypto. For casual users, who simply want to use crypto as an effective currency for purchasing goods and services, PayPal offers an easy-to-use and safe service. However, for those looking to further invest in crypto, traditional exchanges are better suited. Ultimately, it is a question of convenience or control.
