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Paypal not sure if its bargepole is long enough for crowdfunding

We'll sell you bug-infested rugs or dud lava-lamps, but not another man's dreams

Paypal is considering its policy on crowdfund payments after freezing transactions on a number of mob-monetised projects.

The online money-sending service has announced that is looking into how best to move forward with crowdfunding, after admitting that its "existing policies and processes aren’t working quite right for this particular fundraising model".

In a statement, Paypal warned that crowdfunding is based around a model that is "so new, it is potentially open to abuse".

Paypal froze the accounts held by Kickstarter-funded game Dreamfall Chapters, although it later resolved the issue with developer Red Thread Games.

It also froze around $45,000 of payments on an project called MailPile. The payments were later released, along with a Paypal statement which claimed that "crowdsourcing is an exciting new part of our business".

Paypal said that competitors had simply banned mob payments, but it was planning to take a more nuanced approach.

The firm said:

There are unique regulatory and risk aspects inherent to this new way to raise money from supporters around the world. To name one, we sometimes hear from campaign contributors that they are confused about what exactly their money is going towards, and assume that they’ll get it back if the venture is not successful.

PayPal has a responsibility to ensure that the system remains secure, in compliance with Government regulations around the world, and that consumers who contribute to these campaigns understand where their money is going.

It added:

"When done right, crowdfunding is a powerful catalyst for innovation. However, it's clear that our existing policies and processes aren’t working quite right for this particular fundraising model.

"We are now in the midst of overhauling our policies in this space. We're talking to the major crowdfunding players that we work with to put in place a permanent solution that avoids unnecessary account limitations. But making this work for all stakeholders – contributors, entrepreneurs, crowdfunding sites and us - is pretty complicated."

Each crowdfunding application will now be looked at by a senior member of the risk management team, which will no doubt slow down transactions enormously. ®

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