PayPal requests ID post-purchase for cryptocurrency

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Background

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Incident

When using Paypal, consumers are able to create an account for cypto use without uploading a government ID. This is known as KYC or "Know your customers". While this is a legal requirement for most large financial institutions to report crypto transactinons, Paypal has used this, knowingly or unknowingly, as a means of collecting funds from unaware users. Paypal does this by requiring less invasive information to create an account. After account creation a user is then able to purchase or transfer crypto into their account without additional screening. Paypal proceeds to block any transfers, withdrawals, or sales of crypto until much more invasive KYC is performed. Users MUST submit photos of a government issued ID or other identifying documents. At this point, the funds are effectively locked away and out of reach to users that do not have or wish to present the necessary documentation for various reasons. To avoid this issue, nearly all other large institutions which offer crypto purchases require the KYC upfront. Even if this problem only manifests in a small percentage of user experiences, there will be a not small number of users that lose their crypto due to this process. The amount of Crypto being effectively seized by Paypal by denying withdrawal despite accepting a deposit is sure to be large.

A verifyable report of this instance is linked. This flawed system was also witnessed and tested first hand months prior to writing this article. Paypal has been contacted about this multiple times and has not responded favorably.

Lawsuit

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Claims

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Rebuttal

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Outcome

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See also

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