Greg
I appreciate the quick and thorough response, as always. One further point of clarification/elaboration though.
Beyond that, Paypal may not necessarily be sufficiently compliant with UK law...
Hopefully we can be reasonably confident that PayPal complies with the law in all countries in which it operates; if PayPal were found to be breaking the law in any of those countries, that would be rather a big deal, quite apart from any impact on us.
It would be silly to worry that Paypal is anything but fully compliant in all its major jurisdictions for the business that it does. But that doesn't necessarily mean that the information that it passes to you or warrants for you would be sufficient for your KYC under UK law, nor does it necessarily mean that Paypal's KYC/AML obligations will match KYC/AML expectations or obligations for the kind of fund you're proposing. They might, and we might even say that they probably will, but there does seem to be a bit of a dis-analogy. Just because Paypal is on the right side of the law in what it does, that doesn't necessarily mean that a third party that makes use of them would also be on the right side of the law. That being said the more substantial point I wanted to get at there (which I expressed poorly in my original post) relates to regulatory compliance in the creation of a financial instrument which, in this case, would have some (albeit nominal) fiat component.
Actually, on second thought, maybe it would be best to just separate that point out from the Paypal question. What are your thoughts on the additional exposure, if any, that you and potential investors might have if you incorporate a nominal amount of fiat in a private Bitcoin fund offering? The Bitcoin-as-commodity situation in the UK was a bit regulatory plus when you launched the original fund. Might you not compromise that advantage by using Paypal?