PayPal is sparking some tension in the publishing world by requesting that e-book contributors ban books that contain “obscene themes including rape, bestiality or incest.” PayPal notified Mark Coker, founder of e-book publisher and distributor of Smashwords, that it would limit “the company’s PayPal account unless Smashwords removed from its Web site e-books “containing themes of rape, incest, bestiality and underage subjects.”

BookStrand.com and eXcessica were also given the same ultimatum.

A PayPal spokesman confirmed that the company sent such notifications to companies but declined to identify specific recipients.

PayPal said that it had to restrict certain content to appease banks and credit-card companies. The following statements were made in an e-mail from PayPal to SmashWords on February 14th:

“Our banking partners and credit-card associations have taken a very strict stance on this subject matter.”

“Our relationships with the banking partners are absolutely critical in order to provide the online and mobile services we [offer] . . . to our customers. Therefore, we have to remain in compliance with their rules, which prohibit content involving rape, bestiality or incest.”

Spokespeople at American Express, MasterCard, Visa and big card-issuing banks JPMorgan Chase, Citigroup and Wells Fargo did not respond to requests for comment but it is important to reflect on how bank policies are bleeding into other industries.

Policy makers that regulate card-issuing banks are essentially gaining a bigger piece of the pie and could ultimately gain inexorable power.

Could banks eventually dictate what books get published? Will retailers like Barnes and Noble need to force customers to pay in cash if they want to offer books that have been branded as obscene?