PayPal pulls out and leaves a mess behind.
PayPal informed Pornhub that Pornhub could no longer use the PayPal service. The news has been splattered all over the internet.
For those of you who don't know, Pornhub is one of the biggest adult content sites on the web. Why did PayPal do this? I'm not sure but I read it was for some vague Terms of Service violation. PayPal said it “forbid certain sexually oriented materials or services.”
Okay but then why was PayPal seemingly happy with porn for years? Now the impact of PayPal decision was felt deeply by Pornhub. Pornhub used the PayPal service almost like a vendor payout system. Pornhub’s vendors are performers or models who get paid to perform on the Pornhub site and there are more than 100,000 of them and all of them need a way to cash out their earnings. And for years these performers could cash out through PayPal and what a lot of people don't know is that PayPal is one of the lowest cost ways to get a cash out. And it's not like these Pornhub performers are rich, payment processing fees add up. This is really therefore an attack against those legitimate performers.
Now can Pornhub switch to cash out option? Possibly, unless that new cash out option also drops them. And it's not as simple as that for the performers, they will now need to sign up for that alternative payment service and some of these payment providers take a huge fee for that service, 10% or more. They also charge monthly account fees. They might even require the performers to maintain minimum balances in those accounts.
This is why this move by PayPal really sucks. And there's no due process with PayPal. See PayPal is in this privileged position of being a licensed money service business, licensed by states and the federal government. But with this governmental granted privilege comes no obligation to provide services to all legal businesses and I just don't think that's fair.
This is a perfect example of why we need cryptocurrencies, because so many payment providers behave like PayPal - making arbitrary decisions with impunity. So what Pornhub do? Well it’s going to try to solve some of its cash out problem by using cryptocurrency. Good for them, in fact Pornhub was already using a cryptocurrency called Verge. Pornhub will now promote Verge as preferred cash out option.
Now I didn't know a lot about Verge but Verge is a privacy token and I believe it's a fork of, of all things - Dogecoin. So in some ways you could say Pornhub is doing it doggy style.
Now the Verge price has popped on this pull out news by PayPal, the token price right now is up over 40% and coincidentally at the time of this video [recording], Verge is holding firm at position number 69 on CoinMarketCap. Really I'm not joking.
One final thought about this. My firm idealab Capital Partners was the first institutional investor in PayPal and I can tell you this is the second time PayPal has done this. PayPal stopped servicing the adult and legal online gambling sectors about 15 years ago, before PayPal went public. They had some concerns over these businesses being in the vice category, but you know they were legal. And so, at the time I thought that was wrong, and this time I think it's wrong as well.
Finally, as I said, this is why we need blockchain and cryptocurrencies so that law abiding businesses do not have to live in fear that one day they will be subjected to some arbitrary and unjustified decision by a big company. When that company just decides one day it doesn't want to offer its services anymore to that company or even maybe to that whole industry.
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