In a significant shift, PayPal has updated its policies to remove certain protections for non-fungible token (NFT) transactions. This change, set to take effect on May 20, marks a departure from the company’s previous stance on buyer and seller safeguards for NFT purchases and sales.

Details of the New Policy

Under the new terms, PayPal will no longer offer its buyer protection for NFT purchases. Additionally, NFT sales exceeding $10,000 will be exempt from protections against false claims and chargebacks, exposing sellers to potential financial risks from fraudulent activities.

Rationale Behind the Policy Change

A PayPal spokesperson explained that the decision was driven by the challenges in verifying order fulfillment and the dynamic nature of the NFT market. “Given the uncertainty around proof of order fulfillment and other variables in this evolving industry, we are no longer providing buyer protection and are limiting seller protection for NFTs,” they stated.

Official Announcement and Policy Details

The changes were first noted in a March 21 announcement on PayPal’s website but had not been widely reported until now. The updates specifically detail the exclusion of NFTs from PayPal’s Purchase Protection Program and adjustments to the Seller Protection Program to exclude transactions involving NFTs priced at or above $10,000.01 USD.

Background on PayPal’s Engagement with NFTs

Previously, PayPal had offered broad protections under its buyer and seller programs, which refunded buyers for items that were falsely advertised and protected sellers against payment disputes and fraudulent refund claims. These protections were later dialed back specifically for NFT sellers.

PayPal’s Ongoing Involvement in Digital Assets

Despite these policy changes, PayPal continues to demonstrate interest in the digital asset space. In 2022, the company introduced support for cryptocurrencies and filed a patent for an NFT purchase and transfer system that could provide royalties among other benefits to users.