Paypal for Bitcoins

[Instacoins]

Hello, ladies and gentlemen

I just got off the phone with Paypal who I mined some good information from. Paypal cannot reverse transactions after they have gone through unless the person is paying a merchant who was legally obligated to provide them with something which was not provided.

This means that if I transfer you $20, just because we are good friends, Paypal has no ability to reverse that transaction, whatsoever.

Thus, if you have someone who trusts you, and makes a Paypal payment to you, and you send them the Bitcoins privately, you are not able to be held liable whatsoever, and you have no risk of the transaction going against you.

What's your thoughts on that? Anyone want to try and poke holes in my theory for me?

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[Mogumodz]

Wish it was true, back when I ran lobbies for Xbox games a few years ago we all dreamt this was the case.

It only takes a kid to get access to his mums or dads PayPal account or one linked to a credit card and you boned.

They can simply claim the money back saying the account was hacked, used by a minor or someone else, and deep in PayPal's own TOS I'm sure it still says something like Electronic or digital (currency) transactions are not covered by any protection policy.

*Edit - I should really look back into it

*Edit2 - Looking into it

*Edit3 - Nope nothing has changed.

Found this which seems to suggest any "intangible goods" which is better than I tried to explain it.

Why doesn't Seller Protection cover deliveries made in person, or intangible goods (such as digital goods or services)?


One of the most important requirements for coverage under Seller Protection is proof of shipment or delivery. Since deliveries made in person and sales of intangible goods do not have verifiable shipping documentation, we cannot currently extend protection for these types of transactions.

https://www.paypal.com/us/webapps/mpp/security/seller-protection-faq

*Maybe if you sent them a drinks coaster or something physical to a delivery address you could get around it, but they won't be happy seeing you sell BTC with drinks coasters for long as you are doing it to get around rules as I see it.

[Instacoins]

The thing is, I'm not accepting money for a digital currency. Because I am not a merchant. I am just someone who is receiving money from a 'friend' of mine, and then somewhere in an alternate universe where Paypal does not exist and has no bearing on reality, I send my friend the Bitcoins. There is no legally binding agreement anywhere, for all intensive purposes they are two totally separate actions.

The only way I can see someone getting screwed is if they send funds to someone who they trust to send them Bitcoins, and then receive no Bitcoins. They would be out of luck considering my research (the person was very clear and adamant about Paypal's inability to reverse a transaction after it was registered as 'Completed').

[Instacoins]

Wish it was true, back when I ran lobbies for Xbox games a few years ago we all dreamt this was the case.

It only takes a kid to get access to his mums or dads PayPal account or one linked to a credit card and you boned.

They can simply claim the money back saying the account was hacked, used by a minor or someone else, and deep in PayPal's own TOS I'm sure it still says something like Electronic or digital (currency) transactions are not covered by any protection policy.

*Edit - I should really look back into it

*Edit2 - Looking into it

*Edit3 - Nope nothing has changed.

Found this which seems to suggest any "intangible goods" which is better than I tried to explain it.

Why doesn't Seller Protection cover deliveries made in person, or intangible goods (such as digital goods or services)?


One of the most important requirements for coverage under Seller Protection is proof of shipment or delivery. Since deliveries made in person and sales of intangible goods do not have verifiable shipping documentation, we cannot currently extend protection for these types of transactions.

https://www.paypal.com/us/webapps/mpp/security/seller-protection-faq

*Maybe if you sent them a drinks coaster or something physical to a delivery address you could get around it, but they won't be happy seeing you sell BTC with drinks coasters for long as you are doing it to get around rules as I see it.

Again, there is no seller protection, because we are not entered into a legally binding agreement. Our agreement is 'our word', and the sale isn't made on eBay or any other merchant selling service, it's just made through an agreement in email or text or something along those lines.

[Instacoins]

And the last note I will make is, see how 'services' are not protected under Seller's protection either? That means that if I charge you for a service, and you pay me, there is literally no way Paypal could ever reverse the transfer at that point.

Edit* Actually I am reading what you are saying about the Seller's Protection. I will definitely have to keep digging into this until I get to the bottom, you raise a good point.

Edit 2* Well then let me pop another question on you. Someone pays me $40 USD via Paypal for some Bitcoin. Basically they 'transfer' me $40, and then I send the Bitcoin to their address. They send me the $40, it is marked as 'completed' and credited to my account. I go and purchase something off of eBay for $40, send it to the Merchant and then my PayPal balance is 0. Someone claims that that purchase was 'unauthorized' , and it was really their kid on their computer, or some malicious evil person. But they try and retrieve the $40, but it has already been paid out somewhere.

I wonder what would happen in that case? eBay purchases are really what I plan on using my Paypal USD for because I can't see them being useful for much else.

[djmagicmetz]

And the last note I will make is, see how 'services' are not protected under Seller's protection either? That means that if I charge you for a service, and you pay me, there is literally no way Paypal could ever reverse the transfer at that point.

Edit* Actually I am reading what you are saying about the Seller's Protection. I will definitely have to keep digging into this until I get to the bottom, you raise a good point.

Its not really PayPal's job to get between buyers and sellers. The courts can handle that.

[Mogumodz]

You think I sold lobbies over Ebay or wrote out a contract? it was over Xbox live microphone in game with me telling someone a personal verified PayPal address I changed every now and again for this reason, also demanded SEND money as Gift.

Like I said I wish it was true, please feel free to prove me wrong by becoming the BTC PayPal millionaire, but speaking to a PayPal rep means nothing to me (not being mean, going from personal experience as I've been there and done that years ago, I have heard countless times this argument that PayPal can't take your completed money back and just rme as it proves these people are simply looking into it and haven't been doing it long enough to even have tried). I had over £300 claimed back by multiple people months after the sales, one many months later from memory, a stone in a big pond compared to what I got, but still. I've been there as many others have, simply go Google it and see how many have had personal accounts frozen for no reason it's hours and hours of fun reading.

Go sell some BTC for PayPal by all means, I don't mean one or two transactions a day the small fish make trying to milk the tit after the farmer has been, you would be a nobody to PayPal that way and most likely not get noticed, but you won't get rich. Make 100's of transactions a day and try and convince them your friends are simply sending you all that money for nothing...

*Edit just read that back, I thought it sounded aggressive which I wasn't aiming for* Nothing personal/

*edit, you think not having money in the account maters? They put you into negative until you sort it out* Fine if you change accounts every few accounts, but then you are circumventing PayPal's spending limits by not being verified but simple opening new accounts.

[Instacoins]

Haha it's fine, a little bit of aggression never hurt anyone anyways! I would rather have the truth as you see it, I hate euphemisms and doddling around the truth.

Thank you for your insight, it's exactly what I was looking for, someone to challenge my assumptions and offer me conflicting information, to make me double and triple check everything.

Ultimately I will do more research and calculations to figure out the risk vs reward of accepting Paypal for Bitcoin, especially if I plan to move higher volumes.

Hopefully I can come up with a legally fool-proof way. Hey, there's nothing that some motivation and good, hard research can't come up with. 

[Mogumodz]

That's fine, I need 4 posts today anyway and I'm at 100.. woot woot.

I've done the same many times now, The idea about coasters I thought about a while ago, not tried it as I never found any way around the simple fact of what's called an 'unauthorized payment'

Anyone can claim there account was hacked, misused or whatever and PayPal instantly freeze your account until you have sorted it out.

What do I do if a buyer files a claim or a chargeback for an unauthorized payment?


PayPal will place a temporary hold on the funds in question and send you an email requesting proof of shipment.

Once we've received your proof of shipment, we will determine whether or not your transaction is eligible for coverage. If it is, we'll lift the temporary hold and restore your access to the funds as soon as possible. If it isn't, we'll return the funds to the buyer's account and you will be responsible for PayPal's chargeback fee, if applicable.

Read the PayPal User Agreement for our complete terms of coverage.

Without Seller protection, you will be an open target to ANYONE who knows that you sell goods or BTC or whatever from person to person without a contract. People will just open claims left and right at you. Hell I could create 10 PayPal Accounts and simply sell/buy off you and keep doing it over and over saying 'uggggh my accounts got hacked' They freeze your money and I laugh while your out of pocket for 2 weeks while you have to send back and forward emails to PayPal explaining yourself. (even if you do get it back, I still have wasted 2 weeks of your time and worry, and that's just one person)

My advice is unless you want to spend your life filling out PayPal report forms you get sent as to why countless people are trying to claim back off you month after month saying they got hacked etc. PayPal will just freeze or shut your account down imo.

[Mogumodz]

http://stackoverflow.com/questions/12378369/how-to-protect-digital-goods-from-chargebacks

Good read from someone who is doing the same as you and looking about.

[Instacoins]

Yeah I am continuing to do research, just finished my second call to Paypal today. It seems like they run a pretty fair investigation when a dispute is claimed, to try and determine the validity of each party's statements. I am basically going to implement certain identity verification standards that will be able to stand up against any disputes claimed, and stay rather discriminating with who I offer the service to (who as of now only extends to a single party).

I am cautiously optimistic at this moment 

[Mogumodz]

Your right, they tend to do it like Escrow, they get both sides of the story and whoevers looks the best they go with.

Good luck and keep us updated with your findings.

*edit*

This is a good thread to follow with people talking about pros and cons of PP for BTC atm.

https://bitcointalk.org/index.php?topic=211104.0

[Instacoins]

Yes I am still researching it, making some headway too.

This seems to be my working plan:

1) Make the stipulation that I am not trading a currency, that I am instead providing a service.

So, trading a currency would look like: Someone funds me Paypal and I fund them BTC.

But in essence what I am doing is being paid to go and purchase BTC on the market and return them to that person, at a cost.

2) Make sure that person sends me a high quality photo/scan of their ID with their long-term Bitcoin address attached in the email. Each time they send me Paypal I can only fund their BTC to the address that has been provided with the ID. This address must also be sent as a message in the Paypal money transfer.

It's worth a shot, I still have some tinkering today before I feel completely safe. But my understanding is this:

If someone is purchasing an intangible good, neither the buyer nor the seller receive protection from PayPal.

Therefore, the only way a buyer can attempt to receive their funds back is through filing a dispute, claiming they had an 'unauthorized transaction' that 'didn't benefit them'. But, if it was a very kosher, and systematic (normal) payment, looking to be funded to the same bank account, I doubt you could claim they hadn't benefited from it.

Another idea I have is to have them securely send me a photo of their photo-ID, and then to send a number from their ID as proof of identification. For example, I would say: send me your payment with your Bitcoin address and the 8th digit of your Drivers License number.

If they ever brought up a dispute against me, and PayPal went to investigate it, I'm certain I could win that case if those security measures were taken (of course I'm going to want to have someone from PayPal verify that this a working system or give suggestions on how to create a better system)

Also, I'm thinking about having an account that has not been verified in a bank and keeping a low Pay-Pal balance, taking my funds out to purchase items on Ebay whenever possible.

I see two reasons for this, if, the worst case scenario occurs and someone I trusted turns out to be a scammer looking to have 100% of their funds returned (remember this is worst case) I will a) possibly only lose a small amount of capital if PayPal doesn't put my balance to negative, or b) if they do give me a negative balance, of a substantial amount, there may be a hope in hell that I can walk away from the account. (I know someone is going to flame me because technically that's against some regulation but I am just thinking out loud here).

Thoughts, anybody?

[Instacoins]

Also, I have found someone on LocalBitcoins who accepts PayPal for payment, and these are his stipulations:



I accept PayPal, but under the following conditions:

1 - Buyer needs to prove that the PayPal account is funded by a debit account (not a credit ard) that belongs to them. This is to prevent chargebacks.
2 - Buyer must provide ID from their PayPal email address to prevent fraud
OR
Buyer must be willing to have a Skype conversation to verify identity and address.
3 - Buyer must send funds as GIFT.
4 - Buyer must be willing to wait up to three days for the funds to be withdrawn to my bank account.