PayPal for buying ecash

[Nomen Nescio]

PayPal is a possible funding source for ecash/estamps/remailer-tokens
or whatever.  With a PayPal account you can receive funds and pay people,
two elementary steps for a cash-based system.  It is easy to set up web
software to receive payment via PayPal, and many people are already
in the system (it is the most widely used payment system for eBay).
Payments either go through the credit card clearing houses or via PayPal
itself, but merchants don't have to be aware of the difference, except
for the danger of reversed transactions.

There are plenty of horror stories on the web about PayPal, from such
sites as www.paypalsucks.com and www.paypalwarning.com.  Probably some
fraction of these are from pissed off scammers who got caught.

There appears to be a specific problem in the PayPal terms of service:

13.  No Cash Advances. You agree not to engage in behavior that could
     reasonably be construed as providing yourself a cash advance from
     your credit card, and agree not to assist Users who engage in
     behavior that could reasonably be construed as providing themselves
     a cash advance from their credit cards. Such behavior includes, but
     is not limited to, a User paying someone with a credit card-funded
     payment through the Service, then receiving the funds back from the
     original Recipient and attempting to withdraw the funds from their
     account. PayPal reserves the right to reverse all such transactions
     and to terminate any accounts that are associated with such behavior.

This kind of transaction could easily happen with an ecash-selling
service, if the ecash can be redeemed via PayPal.  Someone buys some ecash
with a credit card, cashes in the ecash for funds in his PayPal account,
and then withdraws the funds.  This would be an express violation of
the PayPal terms of service.

Besides this problem, there is the danger of reversed transactions.
Someone who buys ecash with a credit card can cancel the transaction for
any of several reasons, such as claiming that it was done via a stolen
credit card.  In that case PayPal makes the merchant (the ecash bank)
take the loss.

A competing service from Citibank is www.c2it.com.  It is relatively
new and does not have all of the conditions and limitations that
PayPal does.  The terms of service appear to be relatively generous.
Citibank is a big company so one might hope that they have gone over
the bases.  Still it is possible that if C2It catches on that Citibank
will eventually be forced to put in the same kinds of limitations that
PayPal has.

C2It also seems to be more oriented towards email and may not have
the shopping cart software that PayPal provides.  That could make it
harder to interface to C2It from a script.  Buying ecash will require at
least one data exchange for supplying blinded data and receiving coins,
independent of how the ecash is paid for.  If that data exchange is
separate from the email-based C2It payment transaction then there has
to be some key to link them together.  That will complicate the process
and introduce new possibilities for error.