PayPal Freezes ProtonMail’s Campaign Funds: Yet Another Reason They Accept Bitcoin

PayPal Freezes ProtonMail's Campaign Funds. Another Reason to Use Bitcoin?

Yet another PayPal horror story…

Running an email service is neither easy nor cheap, especially when it’s designed to thwart mass surveillance. ProtonMail is a free, end-to-end encrypted email provider based in Switzerland (away from the NSA) and strives to protect its users in an age where privacy has become a commodity. In order to keep its services free, ProtonMail will offer premium accounts to cover the costs of the free accounts, and the team recently launched a fundraising campaign to support the addition of new features. However, after raising nearly $300,000, PayPal surprised the team by freezing their account.

“This morning, we received an email and telephone call from PayPal notifying us that our account has been restricted pending further review… No attempt was made by PayPal to contact us before freezing our account, and no notice was given.”

CCN

The Fundraiser

On 17 June, the ProtonMail team launched an Indiegogo campaign to raise funds to support the service and bring in new features. Having already surpassed the $100,000 goal, the team hopes to raise up to $1,000,000 to support the features below and ensure that ProtonMail remains free:

ProtonMail Campaign Goals

Encrypted chat and encrypted file storage sound pretty awesome.

However, on 30 June, PayPal informed the team that their account had been suspended.

PayPal’s Reasoning

The ProtonMail team swiftly contacted PayPal regarding the frozen funds. This was PayPal’s reasoning:

“When we pressed the PayPal representative on the phone for further details, he questioned whether ProtonMail is legal and if we have government approval to encrypt emails.”

That’s some pretty bizarre logic” right there. Email encryption is perfectly legal under both U.S. and Swiss law, so PayPal really doesn’t have any reason to freeze the account.

Why Bother with PayPal in the First Place?

The ProtonMail team is no stranger to PayPal horror stories. The popular payments processor has frequently held funds hostage for many crowdfunded projects. However, three months ago, PayPal updated its crowdfunding policies, causing ProtonMail to believe that they wouldn’t have any issues. While trusting PayPal seems to have been a mistake, the team stated,

“As much as we wish we could live in a world without PayPal, there’s still a staggering high percentage of the world that uses it.”

Unfortunately, PayPal rules the online payments industry, and few people know of alternatives (like bitcoin…).

“If we could we would have done the entire campaign using Bitcoin. Unfortunately, Bitcoin just isn’t widespread enough yet.”

-Andy Yen (ProtonMail Systems Administrator)

Bitcoin Remains Unaffected

As expected from a company that values privacy, ProtonMail accepts bitcoin donations, and will accept bitcoin payments for premium accounts. Since no central authority controls bitcoin, no one can prevent ProtonMail from receiving BTC contributions. PayPal payments had to be disabled on the Indiegogo page, but bitcoin payments remained unaffected.

“Hopefully this incident will do more to raise awareness of bitcoin and steer people AWAY from PayPal.”

-ProtonMail team

The Aftermath

Andy: “PayPal just unblocked our account, still no clear reason for why it was blocked in the first place. PayPal Switzerland claims they block all crowdfunding campaigns (simply not true).”

Neil: “How damaging would you say this has been to the campaign?”

Andy: “Because the block was around 24 hours and we have been able to extract our fund, it is overall not too damaging to the campaign. However, over 100,000 CHF went through PayPal so had PayPal not reversed, this could have been very harmful to our efforts to make email encryption widespread.”

Neil: “Several members of the Bitcoin community have suggested switching to Coinbase (http://www.reddit.com/r/Bitcoin/comments/29iwe5/in_one_swoop_coinbase_can_rescue_protonmail/). However, Coinbase is also centralised and based in the U.S. What are your thoughts on this?”

Andy: “Our approach is to take donations by directly providing our BTC address.”

Neil: “Crazy question, but any thoughts of building your own payments system to avoid issues like these in the future for ProtonMail and other companies?”

Andy: “I think we will have our hands full just working on email ;-)”

The ProtonMail Indiegogo campaign is still active and needs your support. I just made a contribution of $57 (in bitcoin, of course), that gets me this tshirt:ProtonMail Tshirt

Hopefully more and more companies will start accepting bitcoin, which will put pressure on PayPal and may finally put an end to the all-too-many PayPal horror stories.