xCoins is a cryptocurrency exchange, but it isn’t like any exchange you’ve encountered before, I’m pretty sure of that. For starters, you can use Paypal with xCoins, which is pretty rare in itself. Secondly, it’s a peer-to-peer marketplace, which isn’t too unusual, but this marketplace is focused on connecting Bitcoin lenders with Bitcoin borrowers. You read that correctly. The xCoins exchange is for lending and borrowing Bitcoin.
As a lender on xCoins you fund your account with Bitcoin, it’s the only cryptocurrency the exchange works with currently, and you can choose the interest rate you’d like to charge, starting at 15%. On the other side of the transaction are borrowers, who are auto-matched with a loan based on how much Bitcoin they would like to purchase. xCoins has its own internal ratings system to ensure that both lenders and borrowers are trusted. Once a loan is decided on they pay with a credit card, ACH transfer, or via Paypal.
This process is considered a secured loan, where cash is being used as the collateral to secure the loan. According to the FAQ on the xCoins site, a borrower can pay back their loan in Bitcoin at any time, and when they do they receive their collateral – the cash payment – back less any fees.
If you’re interested in buying borrowing Bitcoin using Paypal you’re probably wondering right about now if xCoins is a legitimate site that you can use to secure Bitcoins. The answer to that is that while the system is far from perfect and could certainly use improvement, it will work for you if you want to borrow Bitcoin in this way.
There is no “About” page on the xCoins site, but with a little digging it was easy enough to find out that xCoins was started August 5, 2016. It was founded by Sergey Nikitin, who holds a degree in BS Computer Science from the University of California, Santa Barbara (UCSB) and an MBA from UCLA and has twenty years of Information Technology experience under his belt.
There’s no phone number listed for the site, but it does show the physical address of 1541 Ocean Ave., Suite 200, Santa Monica, CA 90401, which is a real physical address.
If you go looking for xCoins reviews you’ll soon see that it does not enjoy a very good reputation among the members of the Bitcoin community. There have been a number of complaints, especially from lenders who have had their Paypal accounts frozen. Buyers have complained about not receiving Bitcoins loaned, about the slow refund process, and about slow customer support. Of course there have also been positive reviews of the site.
On the buyer side it has been suggested that any loan of over $20 is subject to fraud, and you run the risk of not getting your Bitcoin. Unless xCoins is not honoring the loan agreement this type of fraud seems impossible at the site, as lenders are required to deposit Bitcoin to lend. Once payment is received xCoins releases the Bitcoin that is held in escrow. This may be an improvement from a prior system and the fraud complaints are old.
Customer support was extremely slow when the site first launched, as they were swamped with new registrations. That has improved, but the customer support staff still isn’t 24 hours a day, and many people have mentioned you could wait several days to get a response from support. There is also a forum on the site where you can ask questions, and you may get faster response there. It’s also worth noting that the xCoins support staff responds to complaints on other review sites and forums, so they obviously care about the user experience and their reputation.
On the lending side the most common complaint is that users are having their Paypal accounts frozen for up to 180 days due to potentially fraudulent activity. Because lenders are paid through Paypal, when they begin using the xCoins site they can often find themselves receiving a high volume of payments. Paypal sees this huge increase in activity on your account and will often flag it as fraud and freeze your account so that they can investigate further.
There have been enough complaints of this type that you should think very carefully about using the xCoins service as a lender. I don’t know about you, but I value my Paypal account, and wouldn’t do anything to jeopardize it. Although to be fair xCoins has instituted a more gradual approach recently. They now limit the amount you can lend initially and then gradually increase your lending limits so the deposits to Paypal also gradually increase over time. This will almost certainly help with frozen accounts, but isn’t a guarantee that a flag won’t come up at Paypal as your volume increases.
Signs point to xCoins working diligently to establish a good reputation in the Bitcoin community, now they need to find a definitive way to avoid the freezing of Paypal accounts. Their gradual lending limits may be the fix that was needed. Improved customer service would also go a long way in improving the reputation of the company.
Borrowing through xCoins
Borrowing is quite easy through xCoins, but for your first transaction you should plan on several hours delay since your identity must be confirmed manually by the xCoins staff before your first purchase is approved. This can take 3-4 hours during normal business hours and up to 12 hours outside normal business hours. xCoins business hours are 08:00am – 18:00pm PST. After the first purchase all subsequent purchases are instant. Here’s the process:
- Set up an account.
- Specify how much Bitcoin you’d like to buy and make a payment with your preferred method (credit card, debit card, ACH, echeck, PayPal).
- Receive Bitcoin to your xCoins wallet, which you can then (and should) transfer to your own wallet.
Lending through xCoins
The lending process is also quite straightforward.
- Set up an account. You’ll also need a PayPal account and you need to link it to xCoins before you can proceed.
- Deposit the amount of Bitcoin you’d like to lend into your xCoins wallet. The minimum amount is $20 worth of Bitcoin.
- Create your listing. You dictate the interest rate on the loan. Interest rates can be from 15% to 30%.
- Wait for buyers, then receive payment to your PayPal account.
Be warned, your PayPal account may be frozen due to the number and nature of deposits, although xCoins has recently begun limiting the amount you can lend when you first start to avoid fraud flags from Paypal.
What Are xCoins Fees
Buyers will face the loan interest fee of 15% to 30% which gets paid to the lender. In addition, there is a loan origination fee of 7.5% that goes to xCoins, and a Paypal processing fee of 2.9% + $0.30. These are pretty large fees for buying Bitcoin, but if you want to use Paypal to buy Bitcoin there are few ways to do so.
Lending on xCoins is free, with no fees charged to lenders.
xCoins has found an interesting loophole that allows purchases of Bitcoin by calling it a secured loan rather than a purchase. Will this loophole eventually be closed? Possibly, but not necessarily as peer-to-peer lending isn’t unusual with fiat currencies.
With that said, there don’t seem to be many users paying back their Bitcoin loans, although this might not be a bad idea. If you borrow 0.1 BTC when it is at $10,000 and want to pay it back when it is $20,000 you would only have to send 0.05 BTC back to the lender since all loans are calculated in U.S. dollar terms. You would get to keep the remaining 0.05 BTC.
It would be interesting to see how well this would work, because it is the lenders responsibility to honor the loan terms and return your collateral when requested. I think that xCoins should have some process in place to assure loans can in fact be repaid, but at this time you’ll need to trust that a complete stranger will return your collateral if you decide you no longer want to borrow their Bitcoin.
xCoins is a novel and unique idea, and the team has been improving the service, but it does seem to have some defects in the way it is currently implemented. The above mentioned loan closure is one of those, as is the ongoing Paypal frozen account question, although that is being addressed by xCoins.
So, even though there are some concerns for both borrowers and lenders right now, there also seems to be improvement in the platform by the xCoins team. Considering that the service is just 20 months old as of April 2018 I think they’ve made great strides from their early days. One further question that needs to be addressed for lenders is the security of the xCoins platform, since xCoins is holding the Bitcoins of lenders.