Since September, an increasing number of bitcoin startups and exchange have begun offering bitcoin-to-paypal payment processing services, allowing users to send bitcoin to international paypal accounts with substantially low transaction and conversion fees.
Bitcoin exchanges such as Bitwala, leading European bitcoin payment company have introduced secure and quick bitcoin-to-paypal transfer service, with service fees ranging from 0.5% to 4%.
“For only 0.5% fee we transfer Bitcoin to PayPal accounts you want. You don’t need a bank account or a credit card. Bitcoin makes services like PayPal accessible for anyone worldwide,” announced the Bitwala team.
However, according to the PayPal Acceptable Use Policy updated on July 1, 2015, using bitcoin to transfer or “top-up” Paypal is “illegal,” as it violates one of the terms of the official policy:
“You may not use the PayPal service for activities that relate to transactions that involve currency exchanges or check cashing businesses”
Although many exchanges and bitcoin payment service providers claim bitcoin-to-paypal transfer service is legitimate and “legal,” it clearly violates one of the terms of the PayPal Acceptable Use Policy regarding currency exchange.
Technically, Paypal users are not allowed to exchange Paypal balance for digital currencies such as bitcoin and bitcoin users cannot exchange the digital currency for Paypal balance. Over the past few months, Paypal has abruptly closed many Paypal accounts suspected of bitcoin and cryptocurrency trades.
“i explained very clearly everything i sold was physical – casascius coins and some asic mining equipment, nothing virtual. i have been with paypal for over 10 years with a business account and paypal credit card, do about $10k transaction with them each month. And they would just ban me because i listed a few bitcoin auction is insane,” said an anonymous Paypal user.
The legality of bitcoin-to-paypal transaction services offered by leading bitcoin exchange such as Bitwala is still left undecided. However, the Paypal team asserts through its terms and conditions that all bitcoin / digital currency related activities are banned.