Seafile is a high-performance, fully-encrypted, open source file storage and syncing solution. The service competes directly with Dropbox and other major cloud service providers.
Although the Germany-based cloud company charges for their storage space, all of their software is completely open source. This means that anyone can run a Seafile server, and compete directly with them.
The company claims that it is “Trusted by more than 300,000 users,” and “used by thousands of teams, companies and organizations worldwide.” Among the customers listed on their website are anti-virus heavyweight Kaspersky Labs and several large universities.
“From Sunday June 19th 2016 we are no longer allowed to accept payments via PayPal,” states the company Blog. “PayPal has demanded that we monitor data traffic as well as all our customers’ files for illegal content. They have also asked us to provide them with detailed statistics about the files types of our customers sync and share on https://app.seafile.de”
“Since complying with this demand would violate German / European data protection laws (and also be morally wrong in our opinion) we have declined to comply with this demand.”
After the unexpected suspension from Paypal last month, the popular cloud storage provider says that the payment processor has apologized for the mistake.
“Theoretically we could accept PayPal payments again,” Seafile says. “But the whole situation has left a bad after taste. It just felt very wrong when we had to cancel all existing subscriptions.”
“We appreciate PayPal for apologizing and being so honest about the fact that they’ve made a mistake. But the whole incident has shattered our trust in PayPal.”
The trouble started when Paypal sent the company a notification of a “violation of the PayPal terms” in early June. PayPal sent along a short questionnaire probing the details of their business plan.
“These questions seemed to target file sharing or torrent services,” Seafile explains. “We tried to answer them as well as we could and also tried to explain to PayPal that we are not a file sharing or torrent service but offer a file sync and share service similar to Dropbox.”
After answering the questions, and clearly stating that Seafile does not monitor customer data, the company then waited two weeks for an answer.
Paypal ultimately apologized, but still required the German company to turn over their customer traffic data. “PayPal has demanded that we monitor data traffic as well as all our customers’ files for illegal content,” Seafile’s blog post explained.
“They have also asked us to provide them with detailed statistics about the files types of our customers sync and share.”
“In our opinion and our lawyers’ opinion, that would violate privacy laws,” Seafile’s Silja Jackson told Fortune. “We also think that giving PayPal [statistical] information would violate our customers’ privacy rights.”
Seafile responded to the situation by temporarily providing their cloud services for free. Following the publication of their blog announcement, quite a few commenters suggested bitcoin as an alternative. The Germany-based firm didn’t take long to deliberate.
“We have to be honest: Up until we ran into trouble with PayPal we were not really convinced that using bitcoin was the right move for us.” the Seafile announcement explained, “But the amount of positive feedback we received made us reconsider.”
“There seems to be a real demand for bitcoin in our user base.”
A representative from bitcoin payment processor BitPay has since approached the company. “Talking with BitPay made us realize that Seafile and bitcoin are a natural fit,” Seafile’s blog says. “Payment with bitcoin gives our users an alternative way to pay that will protect their privacy.”
“At first we were a bit skeptical if we can and should work with a US based payment service provider,” Seafile’s announcement said. “As a German company we are not allowed to transfer users’ personal data outside the EU. But with bitcoin payments this is not an issue.”
Bitcoin is now prominently displayed as a payment option