October 13, 2003

Correction: Bitpass Loves Paypal

According to senior Bitpass executives, the whole Bitpass Paypal drama reported here earlier was all a simple mistake. Everything has been corrected, Bitpass and Paypal play nicely together again, as they should. Please disregard any earlier remarks and remember I'm not a journalist I just pretend to be one on the interweb sometimes.

Original text, no longer valid is below. Please also note that Josh Ellis is actually a Bitpass contractor, not employee, a fact I was not aware of at the time.

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Just got off the phone with Josh Ellis of Bitpass and its official, Paypal has shut down Bitpass' seller account on Saturday and has given them 7 days to prove their service is not in violation of the US Patriot act as reported originally on Waxy.org.

All indications are that this is an act of fear, Paypal is striking out at Bitpass in one of the few ways its can. This is anti competitive practice in a nasty way and is getting close to an anti trust violation. Money is a dirty business even when its digital my friends.

As for the actual threat to Bitpass' functionality, its not that large. Bitpass is not reliant on Paypal, they can function just fine with people using credit cards to fill their accounts. So its just a legal drama at the moment, lets see where it leads.

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as you can see this lead nowhere, mistakes were made and mistakes where fixed. Go use Bitpass, ok?

Posted by Abe at October 13, 2003 03:45 PM


Personally, I think it's a huge inconvenience to people (like myself) who prefer to use Paypal to shuffle around small amounts of money online.

Just looking around for this on the Internet, and I can't find a peep about it except here and on waxy.org.... Surprised no one has picked this up and started spreading it around like wildfire...

For sure, it certainly isn't helping Bitpass out at all. Its annoying and might prevent some business. At the same time though the show can go on. My guess is that Bitpass has enough documentation to make a damn strong case that they aren't in violation of the Patriot anyway. The impression I've gotten from talking to Kurt Huang (the CEO) is that they know the legal issues inside out. I suspect there is a good chance Paypal will back off when its clear that Bitpass won't just rollover. If not I smell a legal battle.

The one thing I don't get is why Paypal is acting like this. Bitpass clearly sees itself as being complimentary to Paypal not a competitor. Perhaps Paypal is scared by the way Bitpass has lowered the friction involved in online transactions even more then Paypal did?

djspicerack, I submitted the story to slashdot where it get turned down. Last time that happened to me they ran the story 6 months later, go figure. Can't hurt to send the story round a bit, although I have a feeling Bitpass just isn't on many people's radar yet.

William -

Interesting that that happened - but what can you do - slashdot covers what slashdot feels like covering. personally, I feel that if it's worthwhile, it'll get picked up.

To be honest, I know it has to have some legs, as I have someone from paypal.com in my referrer logs earlier today, after they searched for "bitpass" on Feedster's site.

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.

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