PayPal freezes account of secure email startup ProtonMail, asking “Is it legal?”

by tech on July 1, 2014

About 6 weeks ago my colleague Barb Darrow covered a new secure email startup called ProtonMail, which has been set up by a bunch of MIT, Harvard and CERN researchers who are annoyed with the NSA’s intrusive ways.

The team’s Indiegogo crowdfunding campaign has done pretty well in the last 2 weeks, thus far raising $283,675 off a $100,000 goal. There’s only one snag for Geneva-headquartered ProtonMail, which is keen to rent servers and get the product out of beta… PayPal has frozen its account.

It’s hard to judge whether to file this under “PayPal being annoying because of its historically over-cautious take on crowdfunding” (which it promised to fix) or “PayPal being annoying because of its politics” (see also: the cutting-off of Wikileaks’ funds). In a blog post on Monday, the ProtonMail team began by erring towards the former explanation:

Like many others, we have all heard the PayPal horror stories, but didn’t actually think it would happen to us on our campaign since PayPal promised, very recently, to improve their policies. Unfortunately, it seems those were hollow promises as ProtonMail is now the latest in a long string of crowdfunding campaigns to be hit with account freezes.

However, this may be more complicated than that. ProtonMail went on to ask why it was being singled out, then dropped this weird detail:

When we pressed the PayPal representative on the phone for further details, he questioned whether ProtonMail is legal and if we have government approval to encrypt emails. We are not sure which government PayPal is referring to, but even the 4th Amendment of the U.S. constitution guarantees: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures….”

Strong encryption is at least theoretically subject to export controls in the U.S., but it’s certainly not illegal to use it there, and it doesn’t require government approval either. The same applies most places, though of course law enforcement powers of ordering decryption are another matter.

ProtonMail is still crowdfunding, but it’s only taking credit card and Bitcoin payments. It updated its blogpost early Tuesday to say it still hasn’t had a response from PayPal explaining the account freeze (PayPal apparently gave no warning either.) I’ve also asked the payment processing firm for an explanation, and will update this if I get one.

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