PayPal is halting personal payment services for users in Japan from Wednesday due to new regulations that go into force the following day.
"We wish to inform you that effective 31 March 2010, you will not be able to send funds using the 'Send Money' function for noncommercial transactions only, until further notice," the company wrote in an e-mail to users in Japan. "The changes to our personal payment services are necessary in order for us to comply with new regulatory requirements in Japan."
Commercial payments, for example to companies for goods bought online, are not affected, PayPal said. Personal payments from outside of Japan to users inside the country will also continue.
PayPal is being forced to temporarily discontinue its services while it applies for a government license to offer money transfer services between individuals, said Atsuko Minatoya, a spokeswoman for PayPal Japan.
Such services hadn't been regulated until now but a new money transfer law will enter into force on April 1. The law is intended to help open up the sector but also requires that companies seek registration, she said.
The move to halt personal payment services is a temporary blow to PayPal, which two weeks ago said it plans to double its Asian operations this year and hire an additional 1,000 employees. PayPal manages operations in seven Asian nations, including Japan, from headquarters in Singapore and last year saw the regional volume of payments it handled jump 38 percent to US$6 billion.
But the year hasn't started smoothly. In February, PayPal stopped processing personal payments in India and allowing withdrawals in Indian rupees. The Reserve Bank of India says PayPal needs authorization to operate a cross-border money transfer service under local laws and doesn't have one.
Rupee withdrawals have resumed but personal payments are still suspended.
PayPal did not provide an estimate for when personal remittance services would resume in Japan.