In a strange move, online payments provider PayPal has started banning accounts of people who sell anything Bitcoin related using its payment gateway, according to a post on BitcoinTalk. It needs to be noted that the eBay has added a ‘virtual currency’ section on its website and people have been selling mining equipment and other Bitcoin related products through it. PayPal also has a policy that stops people from buying or selling virtual currencies including Wow Gold and crypto-currencies such as Bitcoin and Dogecoin.

In this particular case however, there was no actual transfer of Bitcoin involved. A BitcoinTalk member sold Casascius coins, physical coins that can be used to store Bitcoins, on eBay. Casascius no longer come with Bitcoin stored in them after US Treasury Department action in December 2013. The seller tried to point out that he was only selling items which eBay, the parent company of PayPal, had permitted him to. However, the person at the other end was just reading off a script (like most call centres do) and did not try to understand the nuances of the virtual currency ecosystem.

This comes a week after eBay said during its earnings call that it considers Bitcoin wallets such as BitPay and CoinBase to be a threat to PayPal. However, the outright ban on anyone selling Bitcoin related products is also strange considering PayPal President David Marcus owns Bitcoins and has spoken highly of the virtual currency earlier this year. Marcus had clarified that the company is not against selling equipment related to Bitcoin and only opposed the sale of the currency itself via PayPal.

 

This particular incident could be due to the fact that the compliance team was not properly briefed about Bitcoin and what should be banned and what shouldn’t be. When Marcus took over the position at PayPal, he had said that he would do his best to avoid banning of accounts out of the blue and make the whole process more transparent. From reports such as this one, it is not clear how much of an impact he has been able to make.

It is also not clear how eBay can let people list a product for sale and punish the same person later for using its own payment gateway to sell the product. Shouldn’t they stop people from selling these products on eBay if it’s such a problem? The double standards exhibited by the company is really troubling. PayPal had previously gone back on such a ban after it gained media attention so it’s strange that the compliance team is back at it again.

What should eBay do: First of all the company needs to issue a public policy on virtual currencies so that everyone knows and can refer to it in case such an incident repeats. It also needs to educate the compliance team about virtual currencies, because they don’t seem to understand the difference between Bitcoin storage device, Bitcoin mining equipment and Bitcoin the currency.

PS: On a lighter note, wider adoption of Bitcoin could ruin several comic characters such as Two Face forever.