Recently I’ve been hearing more and more about a service called Xcoins. The service describes itself as a “Bitcoin lending service” that allows you to get Bitcoins through the use of Paypal or a credit card.
Buying Bitcoins with Paypal through Xcoins
Until today it has been extremely hard to buy Bitcoins with Paypal due to the possibility of chargeback. However Xcoins claims to have found away around this. Instead of selling you Bitcoins they are loaning you Bitcoins (to an extent). Whether this is actually a loan or a sale is somewhat ambiguous and can be left for interpretation. Here’s how it works:
You (the buyer), come to the site and say you want to “loan” some Bitcoins. After a short ID verification process you will be requested to deposit the USD equivalent of how much you want to borrow + credit card / Paypal processing fees + a fixed amount that acts as the interest rate on the loan.
In fact, there is no ongoing interest on the loan since the amount is a one time payment. In most cases these fees add up to more than 20%.
I wasn’t able to actually purchase Bitcoins through Xcoins since they don’t support my country of residence however after looking around the site I’m left with a few questions.
The site claims that they have competitive fees since lenders compete against each other thus giving you the best possible interest rate. However, when I signed up as a lender I was not able to set my interest rate and it was fixed at 15%, so I’m assuming that’s the lowest possible rate. This is way higher than what I will get on almost any other Bitcoin exchange.
Furthermore, the site says you can repay the loan at any time and get back your USD deposit minus the fees. However you need to keep in mind two thing:
1. “All loan amounts are denominated in US dollars. You will need to return the amount of bitcoin equivalent to the amount you received in US dollars.” (from the site’s FAQ).
This means that if you borrowed $100 when Bitcoin was $1,000 you got 0.1BTC (excluding fees for the sake of example). Now let’s say Bitcoin is at $2,000 – this means you will need to give back only 0.05BTC.
2. “Please contact the lender directly to arrange paying the loan back.” (from the site’s FAQ).
So basically you will need to trust someone whom you don’t know to respect this agreement and actually give you a refund.
Selling (or lending) Bitcoins on Xcoins
You can also lend Bitcoins on Xcoins. This is done by deciding how much you’re willing to loan in USD and depositing that amount into your Xcoins account. The system will then automatically match you with buyers (i.e. lenders) and they will deposit money directly into your Paypal account.
I have not tried this method personally since I don’t want to get in trouble with Paypal in case a buyer files a dispute. However, several users online have reported that they have been generating nice returns through this method.
Online User reviews of Xcoins
For some reason Xcoins’ page on BitTrust does not exist anymore. However I was able to find a cached copy of it and dig through additional user reviews. One of the most detailed reviews had the following statement:
Easy sign up
Quick access to buy bitcoin with CC with paypal
Any amount under $20, you would have no issues
Any amount over $20, you can expect errors where you are charged but the buyer does not send the bitcoin, so you have to notify Xcoins support and paypal.
The refund can take about a week or longer
This has happened numerous times with purchases over $20.
If you keep notifying their support that you have purchased bitcoin, but have not received it from the lender than you can expect to be banned from buying bitcoin.
They will eventually disable your ability to buy bitcoin even if you do not dispute the charges.
Their support staff is not 24/7 of even business hours. If you submit an email to their support expect to wait at least 2 days at the least or longer.
If the lender does not release the coins that you purchase you will still be charged, requiring you to contact both paypal and their support.
Of course there are other good and bad reviews which you can read for yourself but I think this one was the most comprehensive one. There are also a lot of reviews on Reddit and BitcoinTalk but sometimes it’s hard to distinguish the honest reviews from the fake ones due to Xcoins affiliate program.
After reading through dozens of reviews I can say that the recurring theme is that Xcoins works, however their support takes 2 days or more to respond and the fees are extremely high.
Conclusion – Will I use Xcoins?
As a buyer – Xcoins doesn’t seem stable enough at the moment to use for large purchases. Also it seems that the fees will be extremely high compared to other exchanges. However, if the only way you can acquire Bitcoins is through Paypal and you’re willing to pay the price this might be a valid alternative to Virwox.
As a seller – Even though the ROI may be high I don’t want to risk being flagged by Paypal, so at the moment I can’t recommend this to anyone else as well. If you don’t care if Paypal shuts down your account feel free to try your luck and I’d even appreciate if you can share your experience in the comment section below.
In any case make sure to read the FAQ on the site before getting started. Good luck!