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(5) A Financial Institution - issues a line of credit and/or holds funds in a banking account for another party (Customer or Man in the Middle). In the case of VISA/Mastercard etc. they are linked to Payment Processor via complex agreements. NOTE that Paypal is in most cases BOTH a Payment Processor AND Financial Institution (part of the genius of Paypal).
I would like to warn anyone and everyone from the use of PayPal as a merchant and the above claim and/or assumption that PayPal is Genius.
PayPal is no where near Genius. PayPal is pure and simple Evil.
PayPal is ignorance. Their $2/year+sandwiches employees, who write their terms and agreements, still classify Bitcoin as Quasi-Money. As Financial Services Providers, they should at least be aware that there is an entity called FinCEN and use their definitions to align, hence stepping into the modern age and replacing Quasi-Money with Virtual Currency, at least for dealings with Bitcoins et al.
PayPal is bad. We need PayBase, a proper one, not Josh's one.