TheCoolDoc shared his unfortunate experience trading cryptocurrencies through the payment giant
A Reddit thread posted yesterday revealed that a user known as “TheCoolDoc” had his PayPal account permanently banned for day trading cryptocurrencies. The post explained that PayPal’s system flagged his frequent crypto buys and sells as “sales of goods.”
“The system flagged my account thinking I sold $10,000 worth of goods in a week when I hadn’t sold anything in the past six years I’ve had a PayPal account (US account, by the way),” TheCoolDoc wrote.
One day later, TheCoolDoc discovered that the company had permanently limited the account “due to a potential risk.” The message he received added that he would no longer be able to do business with PayPal.
PayPal also placed a 180-day hold on the $462 balance in his account.
PayPal announced support for cryptocurrencies in October, stating that users would be able to buy, sell and hold digital assets. The service is provided through a partnership with Paxos and under a BitLicense from the New York Department of Financial Services (NYDFS).
The payments giant said U.S. account holders could transact in bitcoin (BTC), Litecoin (LTC), Ethereum (ETH) and Bitcoin Cash (BCH) directly inside the platform’s digital wallet. However, payments made via PayPal using cryptocurrencies are settled in their fiat equivalent.
PayPal effectively handles transaction costs for each crypto buy and sell, a noteworthy detail since TheCoolDoc averaged $10,000 a week through daily trading and likely generated a significant transaction load on the platform.
“Our global reach, digital payments expertise, bilateral network and rigorous security and compliance controls give us both the opportunity and the responsibility to help facilitate understanding, redemption and interoperability of these new exchange instruments,” PayPal said.
Nevertheless, the experience described by TheCoolDoc suggests PayPal still has work to do refining its crypto service.
The user updated the post to reveal that the account could not be recovered because PayPal does not offer an appeal process for final decisions.
“They really tried to help me and I think they understood how crazy this ban was because I didn’t sell items to anyone except PayPal (PayPal shows as buyer and seller when you buy in ‘PayPal Crypto’). They finally understood it was more like daily trading and even after that there is no option to appeal (they tried) and it’s final,” TheCoolDoc wrote, referring to his interactions with PayPal support.
This incident has discouraged many users from frequent trading on PayPal, at least for now, as they weigh the platform’s restrictions and risk of account limitation against convenience.