Why is PayPal no longer providing protection for NFT purchases? The payment giant recently made changes to its terms of service, stating that as of May 20th, NFT transactions will no longer be covered under the company’s buyer protection plan, and NFT transactions exceeding $10 million will also not receive seller protection support.
In fact, PayPal updated its policies on March 21st on its website, but it is only recently that the media has extensively reported on it. In the previous policy, both NFT buyers and sellers enjoyed a certain level of protection against fraud, safeguarding participants in NFT transactions from fraudulent activities.
The reason for this change is the high level of uncertainty in NFT transactions. According to reports from foreign media, PayPal decided to alter its buyer and seller protection policies for NFT transactions due to “uncertainty regarding proof of order fulfillment and the evolving variables in the industry.” In other words, there are many uncertain factors in NFT transactions. Unlike physical items, NFTs cannot prove whether they have been received or if they have any defects. Additionally, it requires individuals with knowledge of blockchain information to prove the flow of goods. Moreover, virtual goods are influenced by various factors such as technology, regulations, and market fluctuations, resulting in a high level of uncertainty.
However, adjusting the buyer and seller protection plan for NFT transactions does not mean that PayPal has completely abandoned the crypto field. PayPal has always been adjusting its service range in the crypto field. In 2022, the company expanded its cryptocurrency payment capabilities on its main platform and applied for a patent system to manage NFT purchases and transfers.
In August 2023, PayPal further announced a partnership with the New York-based cryptocurrency financial services company, Paxos Trust, to launch PayPal USD (PYUSD) stablecoin, becoming the first mainstream fintech company to introduce a stablecoin, which can be used for payment and transfer services using the stablecoin. PYUSD is pegged to the US dollar and is backed by assets such as US dollar deposits, short-term government bonds, and cash equivalents, allowing it to be converted into USD at any time. It can also be converted between PayPal and its subsidiary payment service, Venmo, or exchanged for other cryptocurrencies.
However, PayPal’s USD stablecoin has also caught the attention of the US Securities and Exchange Commission (SEC). At the end of 2023, the company received a subpoena from the SEC’s enforcement division requesting documents related to its USD stablecoin. This indicates that the SEC is investigating PayPal’s actions and products in the cryptocurrency field.
According to CryptoSlate, by distancing itself from the NFT market, PayPal aims to reduce potential losses associated with fraud, especially in cases of significant market volatility. However, this conservative approach may also limit PayPal’s participation and growth opportunities in the digital assets market once it heats up again.
Sources:
The Block, Finance Feeds, CryptoSlate
Editor: Gao Jingyuan