Now they've clearly overreacted here, and I suspect someone just pulled the trigger on this without looking into it properly, but, more broadly, their T&Cs do say they don't allow porn, so Lemmy sites on Hetzner without the NSFW filter on (which is a lot of them), would technically be violating this and could get the same treatment. All it would take is a disgruntled user (and some instances have plenty) to complain and...
I use Hetzner storage, which is basically a server running NextCloud. 1TB of storage for just under 6€. Hosting my own server is not an alternative at the moment, so it's the next best thing. Super easy setup as well