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PayPal and Bitcoin? Not So Fast

PayPal is willing to let its merchant customers accept the virtual currency Bitcoin, but it’s not willing to extend protection to cover such transactions – the eBay payments company will limit Bitcoin transactions to the purchase of digital goods. Nevertheless, it’s a significant step and a major coup for Bitcoin advocates.

Senior Director of Corporate Strategy Scott Ellison announced on the company blog on Tuesday that PayPal has entered into agreements with leading Bitcoin payment processors BitPay, Coinbase, and GoCoin. “Starting today, these agreements let PayPal digital goods merchants accept Bitcoin with a simple integration through the PayPal Payments Hub.”

Ellison explained that PayPal was not adding Bitcoin as a currency in its digital wallet. Nor would PayPal begin processing bitcoin payments on its payments platform. “PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop.”

PayPal generally does not offer consumer protection for purchases of intangibles. According to its user agreement: ” 13.3 Ineligible Items. PayPal Purchase Protection only applies to PayPal payments for certain tangible, physical goods. Payments for the following are not eligible for reimbursement under PayPal Purchase Protection” – and “Intangible items, including Digital Goods” tops the list.

Even when it does offer some consumer protection for digital goods, as described in this PDF guide for PayPal for Digital Goods, it is the sellers who absorb the risk, not PayPal: “If a buyer files a Dispute for a digital goods purchase of $4 USD or less, PayPal may, at our discretion, reverse the transaction without requiring the buyer to escalate the Dispute to a Claim. PayPal will limit the number of such reversals in order to help keep both merchants and consumers safe.”

PayPal is making the new Bitcoin processing for digital goods available to merchants in North America first.

Ellison said BitPay, Coinbase, and GoCoin have “taken steps to ensure that they know their customers and that those customers are offered certain protections.” And, he said, “Virtual currency exchangers and administrators interested in working with PayPal in the future must secure the appropriate licenses and put anti-money laundering procedures in place.”

See the full announcement on the PayPal blog.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.