Payment Network Dwolla Cuts Off Bitcoin Users

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Payment network Dwolla prepares to block Bitcoin and virtual currency exchanges

Dwolla is a payment network that allows any business or person to send, request and accept money. Their pitch is low flat fees, or in some cases no fees at all, to send money.

With the recent Silk Road bust that is still making heads spin at the magnitude of the illicit business operated on the Bitcoin marketplace, it seems that some companies are getting nervous about being too close to Bitcoin.

Dwolla is officially cutting off Bitcoin users from its network.

Dwolla Bitcoin

Here is an email Dwolla sent to its users.

Dear Dwolla Account Holder,

As you know, Dwolla does not sell, accept, mine, value, take possession of, or hold Bitcoin or any other virtual currency product, and none of Dwolla’s users transact business with Dwolla using Bitcoin or any other virtual currency product. However, recent interest involving virtual currency and its exchanges has created uncertainty and confusion around virtual currency, and Dwolla’s relationship with a small number of its exchanges. This has forced Dwolla to reassign resources, funds, and services.

As Dwolla gears up for a new stage of growth, we recognize that we can no longer sustain this merchant base (.1 percent of Dwolla merchants) and its unique needs, and that attempting to do so jeopardizes both of our communities’ starkly different, but similarly ambitious, vision for improving payments.

Effective October 28, 2013 at 4pm CT, Dwolla will be withdrawing its service offerings to virtual currency exchanges and virtual currency related services.

What does this mean? Your account, and its functionality, will remain unaffected. However, you can deactivate your account from within your Dwolla dashboard, if you so choose. Dwolla aims to provide its users and the few affected merchants with the guidance necessary to ensure a smooth transition. To do that, we encourage users to over-communicate with our support team, report any suspicious activity, and revisit our terms of service to ensure uninterrupted services.

What is the timeline of events?

  • October 10: Only existing users with a 30-day history with Dwolla will be able to send funds to merchants affected by this change.
  • October 15: Affected merchants will be limited to sending money only, and will no longer be able to receive funds from customers. They will be able to issue refunds to customers at this time.
  • October 28: Affected merchants’ accounts will be suspended. No further activity will be provided. October 29: Provided no security or fraud concerns, Dwolla will transfer any of the remaining funds inside the affected merchant’s Dwolla account to its linked bank account.

The decision to remove anyone from the network — no matter the circumstances — is not something Dwolla takes lightly. We are grateful for the opportunity to service and learn from these users. We wish the community and its pioneers the best.

Sincerely, Dwolla Support

Is this a good move for Dwolla?

On the upside, it gives them a clean separation from the legal and regulatory risks associated with virtual currency exchanges and marketplaces.

On the downside, they may lose customers. One user commented in a forum about the policy, “I’ve just deactivated my account. There is really no reason to use Dwolla other than to buy Bitcoins.”

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