PayPal's File-Sharing Restrictions Drive Merchants to Rivals
Cumming, Chris, American Banker
Byline: Chris Cumming
PayPal's strict requirements for merchants that sell file-storage services have created an opportunity for competitors including BitPay, which processes payments in the digital currency Bitcoin.
Last week, four vendors that market the cloud-storage services of Mega -- the new venture from controversial Internet entrepreneur Kim Dotcom -- stopped accepting payments through PayPal. It is unclear whether PayPal dropped them or vice versa.
PayPal, a unit of eBay (NASDAQ: EBAY), allows such merchants to sell only file-sharing services it has approved. PayPal also makes these merchants monitor uploads to prevent copyright infringement -- somewhat akin to banks monitoring transactions under anti-money laundering regulations.
Stop File Lockers and other antipiracy groups have accused Mega of facilitating illegal downloads. Its founder, Dotcom, faces extradition to the United States from New Zealand for his previous venture, Megaupload, a file-sharing site the U.S. government shut down last year for alleged copyright violations.
Hosting.co.uk, one of the Mega vendors that stopped using PayPal, turned to BitPay, whose service lets merchants accept bitcoins and converts them into dollars.
"Now that PayPal is trying to clamp down on file-storing sites, these vendors who've made investments in their servers and their infrastructure are saying . …