Hong Kong-based cloud storage company MEGA is stuck without a payment provider after PayPal dropped its services following pressure from the US authorities.
The company, which allows users to upload and share files of up to 1GB, has long courted controversy for its seemingly hands-off approach to content, which saw its previous iteration, Megaupload, become a “haven” for pirated video.
In January 2012, Megaupload was briefly shut down by the FBI, who also seized $50m of assets and confiscated much of the site’s advertising profits. The site re-launched as MEGA exactly one year later, and claims to have picked up 100,000 subscribers in its first hour alone.
However, because the site uses AES algorithms to encrypt the data on the customer side, files cannot be decrypted and accessed by the company itself: in essence, MEGA can’t determine the content of the files themselves.
As part of widespread international security crackdowns, US investigators have reportedly begun pressuring card companies such as Visa and MasterCard to refusing service to any site’s that can’t monitor user uploads and behaviour.
PayPal, which partners with card companies to facilitate transactions from linked user accounts, appears to have been caught up in the fray.
MEGA is offering existing customers two months’ free subscription while it searches for an alternative payment provider. Whether companies that refuse to play by the Fed’s security rules can continue to access the financial networks they need to survive, however, remains to be seen.
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