Comment by liquidify

They couldn't do that. If they didn't actually have any crypto, in the event of a large scale increase in price combined with a large scale cash out, Paypal would have to eat the difference from buy to sell price. They would lose their shirt. At minimum, Paypal is buying some percentage of the crypto sales in actual crypto to act as a hedge. However, it is more likely they are closer to 1 to 1 backing since they probably believe that there will be large upward movements in the future and they believe they can make money on both the spreads and the actual bitcoin (assuming they ever care to sell it).