I'm a software developer, and I want to make a website that allows users to sell bitcoin instantly for paypal cash without the hassle of an exchange - I don't even want to make a profit from it. The idea of it is to be a 100% fair exchange, instant, and no account/signup needed to encourage more people to use bitcoin.

Regardless, I was thinking last night and wondered if money laundering here is a concern? For example, a user stole bitcoins and sold it with my exchange. Is it the sellers responsibility to ensure funds are clean (since we are dealing with fiat cash)? What if someone buys bitcoin with dirty money and tries to sell the bitcoin on my exchange for clean the money? Would the seller be in trouble even though there is know way to know funds are legit? I am in the US.

  • 3
    Anybody who accepts a reversible payment (paypal, credit cards, even bank deposits to some extent) for an irreversible one will quickly find themselves defrauded on a massive scale. The rest of these questions are for a lawyer.
    – Claris
    Commented Nov 8, 2017 at 2:54
  • Please research the answers on this site like How can I buy Bitcoin via a Credit Card or Paypal? and these. Commented Nov 8, 2017 at 3:11
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    @eponymous I'm talking about selling though- How can a seller defraud a user? Only I can do a charge back. Of coarse, allowing users to buy bitcoin with paypal would be too risky.
    – linux932
    Commented Nov 8, 2017 at 3:11
  • @xFlare I misunderstood the question slightly, it's mostly a risk for the person receiving potentially stolen funds from paypal from you. PayPal chargebacks in particular can be extremely long reaching, there's not a solid way for customers to protect themselves against that.
    – Claris
    Commented Nov 8, 2017 at 3:56
  • @eponymous The opposite case is true because the OP is allowing people to sell their Bitcoin and is the one paying them with Paypal.
    – Willtech
    Commented May 9, 2018 at 9:31

3 Answers 3


While I’m not an attorney, the website you describe would be considered a “money transmitter business” (MTB) which, in the US, falls under the jurisdiction of The Dept. Of Treasury FinCEN (Finacial Crimes Enforcement Network) which has regulations to prevent money laundering with strict anti-money laundering (AML) policies. You would need to register with FinCEN and comply with their regulations to legally perform such transactions on your website regarding AML/KYC (KYC is Know Your Customer). MTB laws also vary from state to state when it comes to cryptocurrency exchange for fiat money or vice versa. Just make sure to consult with a lawyer before you go live to protect yourself.



This ruling deals with your exact question.

  • Welcome to Bitcoin.SE! Whilst this may theoretically answer the question, it would be preferable to include the essential parts of the answer here, and provide the link for reference.
    – Ava Chow
    Commented Jun 6, 2019 at 7:58

I also am not an attorney, from my perspective all you are doing is buying Bitcoins from the general public and you chose to use PayPal as your method of payment.

Consult an appropriately qualified and experienced attorney.

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