This is a practice that occurs elsewhere in U.S. fintech as well. A bank account can become dormant if there are no deposits or withdrawals over a specified period of time as determined by the governing state. For California, it's 5 years, but for other states, it can be as soon as 12 months. Once an account becomes dormant, the holding bank is required to send the funds to the state through an escheatment process. Those funds are then listed as unclaimed property.

PayPal is not a bank, but but rather operates banking services performed through Synchrony Bank. PayPal manages individual accounts within Synchrony, and it performs required communications and actions on behalf of Synchrony bank. In the U.S., the bank is ultimately responsible for servicing these accounts, but a partner like PayPal can take on that responsibility with the bank's oversight.

Some more info for the curious: investopedia.com/terms/d/dormant-account.asp

Rather than perform this (potentially expensive and arduous) process of handing dormant funds over to the governing state, companies like PayPal opt to just slowly absorb dormant accounts. It's scummy and I hate it. I assume this transfer of funds also keeps the account from being legally considered dormant (since funds did move).