Allowing conversion of soft money to hard money (a btc with 6 onchain confirmations) means every criminal will use you as an on-ramp to convert their hack cc details and bank accounts into immutable hard money.
If I buy a sweater from some company through PayPal, and the company sends me the sweater, they're out the sweater if they get a chargeback. They can fight it, but PayPal is just the middleman.
Cryptocurrency vendors would have to figure out a policy to deal with it, so it might be that nobody would be willing to sell crypto for PayPal, but there's no reason for PayPal to block it.
I mean, it's a big problem in a sense, if vendors don't expect it. But by necessity the bitcoin vendors will have to deal with it as a prime scenario, which means they'll either have to offer a meaningful user identification story (i.e. KYC or similar protocols) or offer a settlement period before the bitcoin is available -- credit the customer's account, but don't let them withdraw for 30 days / 90 days / whatever.
This requires that the vendor take on some risk (because if they make the trade and the price moves but the trade is cancelled due to chargeback the price may have moved) and they have to price this in to the deal; maybe charging a premium for using PayPal, etc. This is all fairly standard and Coinbase, for example, had to deal with a ton of this when they accepted credit card purchases.
But there's no risk to PayPal.
I don’t know how the exact details iron out but this was a concern when I worked on a payments platform. PayPal enables transactions for merchants who don’t have a relationship directly with Visa/MC and thus are themselves responsible at some level.
PayPal processed 711.92B USD of transactions during 2019. [1] It's feasible that they'll hit a trillion dollars in PV this year. While it's true that Visa/MC could lock them out if they so chose, it's incredibly unlikely.
[1] https://www.statista.com/statistics/277841/paypals-total-pay...
Having high rates has significant consequences - leading to fines from card schemes, lower authorisation rates from issuers, higher interchange costs as it harms negotiations for custom deals with issuers.
Even quite small numbers in the enormous pond of PayPal can have serious impacts when it's well optimised.
Also keep in mind, where it is possible to do this kind of thing, it can very rapidly grow to a huge problem when fraudulent end users learn they can do it.
Same thing with Facebook and crypto ads. There were just too many pyramid schemes and get-rich-schemes with a cryptocurrency angle that were being advertised.
Not every PayPal transaction is refundable.
I've bought Bitcoin using PayPal before.
In practice this just means: when a hacker gets into your elderly family member's PayPal account, they need to buy as much crypto as they can since then there's no chargebacks for fraud.