
Bitcoin exchange account of Coinpal shut down by Paypal - tshtf
http://www.bitcoin.org/smf/index.php?topic=2555.msg101084#msg101084
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romland
I can't honestly think that anyone is surprised? PayPal plays it safe and this
has been proven again and again.

At the end of the day, this Bitcoin hype is getting slightly tiresome. I do
apologize for being negative here, but the only thing I take away from this
whole spectacle is that investing in energy is a wise move. The amazing thing
is, that was news a long, long time ago.

~~~
sgornick
Investing in energy? huh?

~~~
jarin
Essentially, Bitcoin generation is tied to energy usage, which means not only
do the power companies profit from Bitcoin generation, they can essentially
regulate the price of it (until BTC is mined out, anyway).

~~~
javert
Power companies can't regulate the price of Bitcoin because they don't control
the price of electricity, which is determined by the government and/or the
market.

Nobody ever regulates or controls the price of anything, except if they're the
only supplier or the government.

~~~
eru
You forgot the "only buyer" case.

~~~
javert
Well, if there's only one buyer, then it's a negotiation between the seller
and the buyer. The seller has to answer the question, "Where is the cut-off
point where it's no longer in the buyer's economic interest to buy from me,"
and charge right below that. Of course, in such a situation, new sellers will
typically emerge.

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iuguy
Paypal's arbitrary policies and ability to freeze on whim or even pull money
out of your account with no comeback are the reason my latest startup[1]
doesn't take Paypal at all. It's just not worth the hassle of dealing with
customer (or $deity forbid, your own) paypal problems.

[1] - <http://www.44con.com/>

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blankslate
I'd be surprised if PayPal didn't see Bitcoin as some form of competition -
so, this is fairly unsurprising. Most companies prefer not to facilitate their
competitors.

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URSpider94
This seems like a pretty clear-cut case. The Coinpal creator didn't do his
homework, and PayPal acted well within its stated policies to protect its
business.

The Coinpal creator chose to email Paypal to ask a question that is clearly
answered in the company's acceptable use policy. Under Prohibited Activities,
Section 3(f): "You may not use the PayPal services for activities that (...)
are associated with the following Money Service Business activities: (...)
currency exchanges.

Second, the operator expresses in his post that he had kept his agreement to
keep chargebacks low, at 0.9%. Consider for a moment that PayPal and the
credit card company are splitting somewhere around 3% of the transaction
amount to cover all of their expenses and make a profit. Let's assume that,
out of 100 transactions for $100, one gets charged back. If it costs the
companies $50 to investigate the customer complaint and process the
chargeback, then the combined companies are losing 16% of their revenue to
cover chargebacks.

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originalgeek
> After about two weeks, I received no response to either email. I decided to
> start operating the site, thinking they wanted to see something working
> before spending time on a response.

I don't follow the logic here... no response != assume whatever the hell you
feel like.

~~~
rumpelstiltskin
What "the hell" should he have done?

There's only 2 possibilities here - 1. They didn't see the emails or 2. They
saw them, but chose to ignore them. Either way, his choice boils down to
killing his idea or launching it and seeing what happens.

It would be utterly moronic of him to kill his idea simply because they didn't
respond. Might as well leave that decision to them by launching it and seeing
how they respond. If they don't shut him down, then his service isn't breaking
their rules. If they do, he's no worse off than not launching in the first
place.

He did the right thing.

EDIT: _HN is not letting me respond to wmf below, so I'm responding here_ \-
Where does he say he knew paypal would freeze the account sooner or later? In
fact, the whole point of his emails to them was to specifically ask if his
service was compliant with their TOS.

Let's stick to facts and not get into subjective arguments. Your idea of
'ordinary' can be completely different from his or anyone else's idea of
'ordinary'. This is why TOSs, FAQs etc exist in the first place. But since he
couldn't find an exact answer anywhere, he emailed them.

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Locke1689
Hacker News has a timeout for responding to nested comment threads. The idea
is to prevent long and drawn-out reply bickering between two people. If you
can't reply to one of your comment's children, calm down, take a breath, and
wait 5-20 minutes.

~~~
rumpelstiltskin
Thanks for the explanation, had no idea. You really shouldn't get so angry
tho.

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spenvo
I chose to focus on his last point:

"CoinCard will be easier to bring back, minus PayPal payments. ... A possible
PayPal freeze was one reason I focused on "gift cards" rather than PayPal
exclusively. This whole situation has reminded me once again why distributed,
resilient systems like Bitcoin and OTC are so important."

Paypal frustration led Michael to Bitcoin, and his service ended up dependent
on it. That was probably not his original intention.

This makes MtGox's integration of (ACH) Dwolla even more important to BTC's
liquidity. MtGox is receiving record traffic right now, nearly on the order of
a DOS attack.

~~~
eof
The guy running mtgox says it's an actual ddos.

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personalcompute
I'm really interested to see if bitcoin will survive the law. I'm not a
lawyer, but my understanding is that creating an alternate currency is
strictly illegal. Maybe this is the first indication of the end of bitcoin?

(Edit: This is incorrect. See comments.)

~~~
frossie
_I'm not a lawyer, but my understanding is that creating an alternate currency
is strictly illegal._

IANAL either, but I would be interested in a citation on that. My
understanding is that say in the US (a) you can't print US dollars (because
the Fed has a monopoly on that) and (b) you can't refuse to take US dollars
(because they are legal tender). That said, I don't know of a law that says
you can't also use an alternative currency. For example if a school had
"school money" where "credits" are earned for good grades and are exchanged
for lunch or snacks, that is a form of alternate currency that surely is not
illegal.

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mortenjorck
Of course, the line between "illegal" and "can get you in legal trouble" is
never a crisp one.

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daniel1980fl2
exactly. thats why point B does not work in most government facilities
nowadays. try to pay a court case, get drivers license, pay for taxes or your
license plate with cash --- a nice clerk will tell you "check, money order or
credit card only".

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pbreit
There's a major disconnect here: PayPal is not digital cash, it's credit card
processing. There is a major difference.

~~~
patio11
Paypal is both a credit card processor and an online wallet (stored value,
digital cash, etc), both aspects of which complicated their anti-fraud and
regulatory efforts.

There exists money in my Paypal account which can be spent or transferred at
my direction and which does not exist elsewhere at an account under my
control.

~~~
count
But the money in your paypal account is denominated in US Dollars (or Yen, or
whatever real world currency), isn't it? Paypal's 'online wallet' is just
another way of saying 'checking account'. I have a checking account which has
a stored value that I access via debit card or paper check, and can transfer
or spend the money at my direction. The money in that checking account does
not exist elsewhere at an account under my control.

I don't see the difference here?

~~~
lutorm
I thought Paypal had argued strenuously that it is _not_ a bank, so it's,
according to them, _not_ just another way of saying checking account.

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jostmey
First wikileaks and now Bitcoin. I'm boycotting paypal.

~~~
mdaniel
This attitude comes up again and again when PayPal is in the news for doing
something (ignorant/unpopular), but those who utter such statements fail to
understand the power of the network effect.

If you wish to buy something and the seller only accepts PayPal, then good
luck with your boycott. In my experience, the larger the retailer, the more
infinitesimal the chance that they will "listen to reason" and consider
accepting an alternate form of payment.

Oh, and did I mention eBay has this affinity for PayPal?

~~~
jpk
The larger the retailer, the more likely they will offer payment methods other
than/in addition to PayPal. As the retailer, it's in your best interest to
give the customer the greatest possible number of ways to give you their
money.

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sgornick
So long CoinPal, and thanks for all the bitcoins!

[http://www.bitcoinmoney.com/post/5086167006/paypal-
freezes-o...](http://www.bitcoinmoney.com/post/5086167006/paypal-freezes-out-
coinpal)

------
sfgfdhgfdshdhhd
It may still be possible to exchange bitcoins through mtgox and then through
liberty reserve and bank money orders. Each stage along this route eats up
1-5%. Otherwise, informal transfers through the OTC ( <http://bitcoin-
otc.com/> ) do work.

Tying too much cash in paypal is a mistake. There is no guarantee that you
won't snag on some tripwire in their rules engine. That and all BTC-cash
exchanges have so far been shut down by PayPal.

But more fundamentally, Bitcoin is incompatible with the credit card system.
CC security is very lax, so CC transactions have to be reversible (the onus is
on the merchant rather than the buyer). Banks (and Paypal is a bank) are ill
equipped to parse the math and the crypto that go with a proof that a
transaction has occured. Not technically, but institutionally they are a
different thing.

~~~
gexla
This is exactly correct. I got seriously down voted for making the same point
in less words. Bitcoin and exchanging e-currencies is nothing new. People have
been getting screwed over exchanging Paypal and credit cards for other
currencies for a long time. That's why Paypal doesn't allow it. But yet, these
services keep popping up. Poor business idea, it's been tried many times and
it doesn't work.

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gexla
Seems like a silly idea anyways. There is a good reason why Paypal doesn't
allow it. There is also a good reason why most other exchangers don't allow
credit cards. In both cases there are too many people running charge backs.

~~~
mike_esspe
He writes, that his chargeback rate was 1.5%

~~~
gexla
I have worked a lot with exchanging e-currencies for certain niche reasons.
Exchanging can be quite a pain. Generally you have to tap into the various
exchange communities to figure out your options and lookup reputable
exchangers. In these communities you will find that a widely accepted rule is
that you don't exchange with currencies which allow charge backs (unless
perhaps you personally know that person.) That includes Paypal and credit
cards.

Yes, there are people who will exchange for Paypal and credit cards. Yes,
there are some services which can start out with low charge back rates. The
problem is the scammers will find you as the service grows. This is a business
with low margins, eventually you will lose out.

Again, Paypal isn't perfect, but the service has plenty of experience with
this issue. Too many people are getting screwed over. Unfortunately this is a
lesson that people have to learn over and over again. Do NOT use Paypal for
exchange.

I don't understand why I'm getting down voted for this.

