Why shouldn't I accept PayPal when trading bitcoin?


I've heard that it's not a good idea to accept PayPal payments in exchange for Bitcoin. Why?

Colin Dean

Posted 2012-11-24T03:11:33.633

Reputation: 6 834



First of all, it is likely a violation of PayPal's Acceptable Use Policy as of Oct 2011:

3(h) involve currency exchanges or check cashing businesses

Given this, it's unlikely that PayPal would be amenable to helping at best, and may close your account (and freeze the funds it had for six months) at worst.

Another chief problem is the high likelihood of chargebacks. PayPal has generally sided with the buyer when any dispute is brought against the seller for any reason. For this reason alone, it's best to accept Bitcoin only when you trust the buyer and have some influence on their reputation.

Furthermore, Paypal has high fees (current 2.9% + $0.30 USD).

Colin Dean

Posted 2012-11-24T03:11:33.633

Reputation: 6 834


PayPal clarified this in an internal email from 2013 June 10: http://www.reddit.com/r/Bitcoin/comments/1g23w2/paypal_email_to_employees_policy_regarding_bitcoin/

– Colin Dean – 2013-06-10T21:02:40.703

If the transaction wasn't with a business, but instead was with an individual, does that make it acceptable with the given wording? – Highly Irregular – 2012-11-24T20:19:40.713

1Given the wording, it may not apply. Given PayPal's practice, it apparently does. – Colin Dean – 2012-11-27T23:56:16.403


As PayPal is not a bank and reserves the right to freeze your account for whatever reason they deem fits them, you should never use PayPal, unless you can afford to lose your money, or are prepared to take them to court and win, should they steal your funds.

While this is not specific to BitCoin per so, it is probably likelier to happen with edge cases that PayPal for some reason might be likelier to see as a threat to their interests or business model than the everyday type of transactions that make up the bulk of their volume of business.


Posted 2012-11-24T03:11:33.633

Reputation: 141


You should NEVER use Pay Pal. As other readers have noted, they do what the danged well want to do.

And if they make a mistake, which happens regularly, they will NEVER admit their mistake and give you your money back. Plain pure and simple! I know.

So using Pay Pal is an invite to lose your money. It has happened to 100's of thousands including me.

I am actively seeking an acceptable alternative to pay pal, but so far, no go.

Any suggertions.


Posted 2012-11-24T03:11:33.633

Reputation: 19


PayPal it is a Bank, it became a Luxembourg Bank in 2007 ( http://tamebay.com/2007/05/paypal-becomes-a-bank-no-longer-under-fsa.html )

Sebastian Castro

Posted 2012-11-24T03:11:33.633

Reputation: 41

Can you substantiate that beyond the blog post? The page on PayPal's site to which it links is no longer there. – Colin Dean – 2012-11-28T04:09:06.760