Paypal Challenges BitPass

Paypal has frozen the account of micropayment service BitPass. Scott McCloud, one of their advisors and its most prominent user, stated that Bitpass was given seven days to provide Paypal evidence that their service isn’t a violation of the U.S. Patriot Act. Is this because Paypal is genuinely concerned that Bitpass could be used for money laundering, or are they interested in shutting down a potential competitor?

Scott reported this information at this O’Reilly’s Foo Camp over the weekend, and doesn’t appear to have hit the web anywhere yet. Please let me know if you find any more information about this story.

Update: Abe Burmeister spoke to Bitpass and confirms the report.

October 14, 2003: Paypal employee Patrick Breitenbach posted a comment on my site, stating that Paypal reactivated the Bitpass account this morning. Patrick said that Paypal didn’t intend to disrupt payment process, and claimed the decision to suspend their account was unrelated to competitive issues. Though the End of Free points out that their Senior Manager for Biz Dev is speaking a micropayments conference next month.


    well if its true then not all of their employees have been told yet… should know more soon.

    Just confirmed the story with Bitpass, they were given notice on Saturday. Bitpass had a standard seller account with Paypal, nothing special. Their service is pretty much unaffected, you just need to charge your bitpass account up with a credit card only. The Bitpass people don’t seem to worried, they can go forward without Paypal no problem.

    All indications are that Paypal is doing this because they are genuinely scared of Bitpass and acting in one of the only ways they can. Money laundering? At 25 cents a pop? Try again. This is straight business competition, and Paypal is getting dangerously close to engaging in illegal anti-competitive practices.

    wow – this is pretty screwed up, and really looks like eBay/PayPal is taking it to BitPass…. Wonder how this will end up. Thankfully, Homeland Security boss Tom Ridge is at the Sox/Yankees game so they’ll get a little reprieve… Wonder where Ashcroft is….

    I’m a PayPal employee and wanted to update readers on the status of the PayPal/BitPass relationship. Over the weekend BitPass’ PayPal account was suspended pending assurances that BitPass and PayPal were in compliance with the US Patriot Act given the nature of the respective companies’ services. PayPal did not intend to disrupt payment processing and we are reviewing our procedures to ensure that this situation doesn’t happen in the future. PayPal has been in direct contact with BitPass on the matter and BitPass’ account was fully restored this morning. Contrary to speculation, this incident had nothing at all to do with competitive issues and in fact PayPal supports companies such as BitPass, Cybersource and Xoom that are building complementary services.

    I’ve confirmed with Bitpass that everything is back in order. The relationship between the two companies seems to be a-ok as far as I can tell.

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