KEY POINTS
Financial services giant PayPal has made a significant change to its user protection policies, excluding non-fungible tokens (NFTs) from both its Purchase Protection and Seller Protection Programs. The revision, announced on the company’s policy update page, takes effect on May 20, 2024.
Previously, these programs offered safeguards against fraudulent NFT transactions and chargebacks for a variety of purchases made through PayPal. However, NFTs will no longer be covered under either program.
This means buyers will have no recourse if they purchase a counterfeit or misrepresented NFT, while sellers face a complete lack of protection for high-value NFT sales exceeding $10,000. Limited protection remains for lower-value transactions, but only in cases of demonstrably unauthorized purchases.
The rationale behind this decision is not entirely clear. The NFT market is known for its volatility and occasional instances of fraud. PayPal may be hesitant to navigate the complexities of disputes and proof of ownership within this market. Unlike traditional transactions, NFTs exist on blockchains, a decentralized system that can make it challenging to determine legitimacy and identify fraudulent activity.
This move comes as a surprise in light of PayPal’s recent efforts to widely embrace Web3 technologies. In September 2023, the company filed a patent application outlining plans to streamline NFT trading by enabling fractional ownership and integrating with third-party service providers.
