A lot of people are trying to purchase Bitcoins or Litecoins with Paypal but are discovering that it’s not an easy task. Here’s a short explanation why.
What’s important to understand about Bitcoin, is that it’s like cash. If you lose it – tough luck. Paypal, on the other hand, is just like any other credit card company that deals with fraud and customer complaints. This means, that theoretically, someone can buy BTC (Bitcoins) with Paypal, get the goods and complains of never receiving them. Let me give you a short example.
Let’s say I want to buy from you 1 Bitcoin and pay you through my Paypal account. We agree on a price (let’s say $1000). I pay you, you send me the Bitcoins. A day goes by and I then contact Paypal and say “I gave this guy money for Bitcoins and never received them”. Of course Paypal has no way of checking if that’s true or not (since Bitcoins are untraceable like cash). And since credit companies usually support the complaining party it is highly likely that that I will get the BTC and my money back. Because of this loophole, most exchanges won’t allow the purchasing of bitcoins with Paypal.
Aside from what I’ve just stated above, there another reason that it’s difficult to buy Bitcoins with Paypal. Since Paypal is also an e-currency, they do not support the purchasing of other e-currencies – and so they may sometimes not allow this. Paypal has been known for closing several accounts since they were dealing in buying and selling of Bitcoins.
Remember: The problem is only from the seller’s side, so if you’re the buyer, there’s not much harm that can be done.
So you are left with 2 options:
1. Find a way to circumvent this problem as explained here.
2. Buy BTC from individuals whom you trust through OTC (over the counter) sites like Local Bitcoins.
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