Internet users generally like the idea of encrypted email, as it means third parties can't read their private correspondence without expending a great deal of effort. PayPal, however, appeared to take a contrary view. Possibly questioning the service's legality, PayPal temporarily refused to accept payments for a crowd-funded campaign for startup encrypted-email provider ProtonMail.
ProtonMail is a Swiss Indiegogo project that offers 1GB of secure email storage in exchange for $5. The organization does not have access to the contents of users' messages, and encrypts messages from the moment they leave a user's inbox to the moment the recipient opens them. The company also refuses to share any information with governments.
Although ProtonMail expressed distaste for PayPal's allegedly poor history with crowd-funded campaigns, ProtonMail still offered a PayPal-based crowd-funding option due to user demand. This may have been a mistake, as PayPal yesterday (June 30) froze the account without warning or reason, ProtonMail said in a blog post.
The freeze was lifted about 11 a.m. EDT today (July 1), according to the ProtonMail blog. When ProtonMail initially contacted PayPal via phone to clear things up, PayPal asked whether the company had government approval, or whether ProtonMail was legal at all. For what it's worth, ProtonMail does not require government approval, nor is it illegal anywhere in North America or Europe.
At present, ProtonMail has raised more than $300,000, well above its $100,000 goal, and still has 17 days to go, but it's not clear how much of this money came via PayPal.
Ultimately, PayPal can refuse to play middleman for whatever reason it chooses. Yet people may elect to use PayPal for crowd-funding less often.