A boycott of the platform is being discussed, as sellers flock to other sites in an attempt to keep their earnings flowing.

So what is going on - and what happens next?

What's the issue?

Etsy's reserve system means that some sellers are seeing 75% of their takings frozen for up to 45 days.

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This has led a number of sellers to call for a boycott, creating social media channels such as the Etsy Reserve Strike Group. Some have complained to the UK's Office of the Small Business Commissioner (OSBC), which says it is "extremely concerned" about the reports.

Etsy, which has over 7 million active sellers and more than 120 million items for sale, says payment reserves are used to "keep the marketplace safe" and cover potential refunds. But, they are normally in the single digits.

Earlier this month, Sky News spoke with Pietra - a seller who had more than £15,000 held by Etsy. Her story, alongside a number of others, helps outline why the issue is so prevalent - with Pietra telling us that she could not even afford food due to the freeze.

You can read that story in full here.

Typically, when a purchase is made on Etsy, the seller posts the item once the buyer has paid, at which point the seller must send the item and mark the order as dispatched, and the payment will then be received by the seller.

This is how Etsy says it protects both sellers and buyers, and the system is common in online marketplaces.

However, some sellers say payment reserves are being put on some sales for extended periods of time without reason.

What's been said?

One complainant told the OSBC that Etsy "kept changing the goalposts" over the reserve payment system, which the company said is constantly under review.

Another claimed that those who try to speak with Etsy about their experiences saw sales decrease as a result.

"They take their fees out of the money that isn't withheld," they said.

"When you raise issues, which is incredibly hard as Etsy is quite impenetrable, you are victimised.

"When I complain, my sales reduce dramatically for a few weeks; you clearly get pushed down the algorithm."

Etsy strongly denies this is the case and says under no circumstances would it retaliate against a seller for bringing an issue to its attention.

What's the scale in the UK?

Small business commissioner Liz Barclay told Sky News she was "horrified" after hearing about the number of people affected.

"I was horrified to read this morning that Etsy itself estimates that under 9% of sellers worldwide could be affected by the holding of reserves," Ms Barclay said.

If those numbers are correct, around 90,000 sellers could be affected - as the OSBC estimates UK sellers number at around one million.

What's the reaction been?

Sellers have flocked to social media in outrage, and competitor sites have seen a massive upturn in new user registrations in recent days as media coverage has continued.

Head of online marketplace The British Craft House, Susan Bonnar, said that "hundreds" of new users have moved to her site after she posted on social media about her platform, promising to "never withhold any money from our sellers" in the midst of the Etsy controversy.

On a broader scale - a wider boycott is being discussed among social media pages dedicated to talking about the money holding issue.

It is not yet clear exactly how big or what shape a potential boycott may take - although much of the discussion centres around sellers placing their accounts in "holiday" or "vacation mode".

This keeps their account active, but stops any orders from being placed - that way, sellers don't need to completely delete their accounts, but rather stop taking orders and wait until some resolution is offered.

What's next?

It remains to be seen if a boycott is possible, although social media traction is certainly picking up - with the Etsy Reserve Strike Group already on around 800 members on Facebook, and a number of sub-Reddit threads dedicated to the issue.

In terms of any legal response - the OSBC has no power over international companies, but is in discussion with Etsy over its concerns.

Sky News spoke with Sarah Riding, a commercial partner at the law firm Gowling WLG. She outlined that Etsy is under no real legal pressure to change or remove the feature, but is under a kind of moral pressure as its sellers feel this extra financial squeeze on top of a cost of living crisis.

"While Etsy is right to defend its position, there is a clear case here for the brand to examine how transparent they are about their rules - to ensure customers are made as aware as possible about how these are enforced," she said.

"It is more important than ever that Esty observes this as the cost of living crisis means consumers need very little motivation to be loyal and can easily switch to an alternative competitor if their needs are not met."

Etsy's own seller handbook advises users of the following steps to avoid having their funds placed in reserve:

• Add tracking to orders - if Etsy can confirm the tracking number, reserve funds are released when the order is dispatched
• Dispatch orders on time
• Don't mark items as dispatched before dropping them off with your carrier
• Try to respond to all messages from customers promptly - within 24 hours if possible
• Make sure your shop remains in compliance by being across policies
• Strive for good reviews by having good customer service and quality products

An Etsy spokesperson told Sky News: "Etsy has long provided sellers with a generous payment schedule - the vast majority of sellers receive their funds when they make a sale rather than having to wait until the buyer receives the item, like they might with other selling platforms. In some cases, we will delay a portion of funds from a sale until we can confirm that the order has shipped.

"This enables us to continue paying sellers in a timely manner while taking the steps necessary to help keep our marketplace safe and protect our customers when there are unexpected issues with their order. As always, we will continue to iterate and improve upon our programs, including payment reserves, in order to support our sellers."

It also said payment reserves are released when a seller adds valid tracking that enables Etsy to confirm the order is in transit, and funds held on reserve from most Etsy orders became available to sellers on average within two weeks of the order date.

It added that less than 2% of all active Etsy sellers have a reserve on their account and, for more than 70% of those, the funds currently on hold total less than £40.