Streamza, a handy service that allows people to stream music or video torrents directly from the cloud, is no longer allowed to accept PayPal payments. According to the payment provider Streamza violates its policies, even though it has plenty of legitimate uses.

PayPal is widely known for its aggressive stance towards BitTorrent sites, Usenet providers and file-hosting services, and it appears that streaming services based on BitTorrent technology are receiving the same treatment.

Last summer Polish developer and Wikidot CEO Michal Frackowiak launched Streamza, a torrent download service that lets users stream music and movies securely to their PC, TV, iPhone or iPad. Streamza has been growing steadily ever since and welcomes thousands of new users each month.

Earlier this week, however, the developer was presented with some bad news. Without prior warning, PayPal stopped providing payment services to Streamza and limited the associated account. That also means that all funds have been frozen for the time being.

“They emailed to inform me that my PayPal account had been reviewed and that Streamza does not comply with their policies. My account became ‘limited’ until I removed PayPal from checkout and agreed to their policies, which I did immediately,” Michal informs TF.

The PayPal ban is a major setback for Streamza, as it will no longer be able to process new and recurring membership fees from premium subscribers. At the time of writing the PayPal account is still locked, and Michal hasn’t heard from PayPal after the initial email.

As usual, PayPal remains vague about the precise reason for the ban. The payment provider mentioned that Streamza violated their Acceptable Use Policy, which suggests that PayPal is concerned about possible infringing uses of Streamza.

Streamza

PayPal’s policies don’t allow “infringing” services to accept payments. In addition, the company requires file-sharing services to be pre-approved.

“Service Requiring Pre-Approval: Offering online dating services; providing file sharing services or access to newsgroups; or selling alcoholic beverages,” PayPal’s AUP reads.

This approvals process requires services to agree to a list of strict terms and conditions. As can be seen below, this includes full disclosure of the processes that are in place to deter piracy, and allowing PayPal to actively monitor their service for copyright infringements.

PayPal’s Terms

While Streamza doesn’t promote copyright infringement in any way, it could be used to download or stream pirated files, much like any other streaming or download services including YouTube. Michal believes, however, that the payment provider is more strict with smaller players.

“When looking at these policies I wonder how the hell Mega.co.nz can work with PayPal. Somehow I am not that surprised: rules between two bigger players can be different from between a bigger player and a smaller one,” Michal tells TF.

Technically, PayPal may have the right to cut off Streamza under its policies, but it would have been appropriate to send an early warning. Over the past few days the service could only accept payments via Bitcoin, which is hurting business.

Due to personal circumstances Michal had plans to auction off Streamza, and the PayPal issue is the straw that broke the camel’s back. He is accepting bids on Flippa and hopes someone is willing to take over the service, to keep the 34,000 registered users happy.

“I believe that after half a year of running Streamza I created something cool. A project that some people love. It’s not only a great tech and user interface, but a service that fills a niche,” Michal says.

“Personally I hope someone smart can take it from here. It’s a really good piece of tech and a project that has its fans.”

Update: A few hours after publication Michal heard back from PayPal. He can enter the pre-approval process to accept payments for file sharing. This means that Streamza has to comply with the terms listed above. Until this process is completed Streamza can’t process PayPal payments, but the other account restrictions have been lifted.