PayPal freezes out ProtonMail, asks if startup has 'government permission' to encrypt email

PayPal has frozen the account of security startup ProtonMail, and has questioned whether the firm is legal — and has "government approval" to encrypt emailed communication.

ProtonMail is a Swiss-based email service that offers full end-to-end encryption for emails. Developed by MIT, Harvard and CERN researchers, the startup is in the midst of an Indiegogo crowdfunding campaign to get the service off the ground, and has so far managed to secure over $285,000 in funding.

The campaign's ethos is below:

We believe that privacy is a fundamental human right that must be protected at any cost. The advent of the internet has now made all of us more vulnerable to mass surveillance than at any other point in human history. The disappearance of online privacy is a very dangerous trend as in many ways privacy and freedom go hand in hand.

ProtonMail uses end-to-end encryption, which means your data is already encrypted by the time it reaches the company's servers — and so even the creators of the email service cannot read the contents. As the company has no access to these messages, they cannot decrypt them so such data cannot be passed on to third parties. ProtonMail uses servers based in Switzerland that are outside the jurisdiction of the US and EU, and no metadata is saved — in theory, keeping email content safe and users anonymous.

Emails can also be set to self-destruct after they expire. 

The startup says that its account was frozen last week without any notification from PayPal. On Monday, ProtonMail received a call and email from the online payment service, stating that until further notice, the startup's account and assets within were frozen. In a blog post, ProtonMail said:

While the $275,000 ProtonMail has raised in the past two weeks is a large amount, it pales in comparison to many other crowdfunding campaigns that have raised sums in excess of $1,000,000 so we can't help but wonder why ProtonMail was singled out.

When ProtonMail pressed the PayPal representative further for the core reason why its account was frozen, the representative "questioned whether ProtonMail is legal," and importantly, if ProtonMail "had government approval to encrypt emails." This vague response certainly isn't enough for the startup, which writes:

We are not sure which government PayPal is referring to, but even the 4th Amendment of the US constitution guarantees 'the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.'

It seems PayPal is trying to come up with ANY excuse they can to prevent us from receiving funds.

You can still contribute to the campaign through credit card or Bitcoin, but unless the account restriction is lifted, PayPal is no longer an option.

Update 18.28GMT: A PayPal spokesperson told ZDNet:

"PayPal recently made changes to the way it handled accounts of people who were using crowdfunding sites to support their ideas. In response to customer feedback we established a streamlined process to specifically support crowdfunding campaigns. This process involves engaging crowdfunding campaign owners early on to clearly understand their campaign goals and help them ensure their campaigns are compliant with our policies and government regulations.

In the case of ProtonMail, a technical problem this week resulted in PayPal applying restrictions to the account. We have contacted ProtonMail today to solve this and can confirm that ProtonMail is able to receive or send funds through PayPal again. We are sorry for any inconvenience caused."