i heard all they are going to do is hold it on paxos exchange.... so if paxos gets hacked( probably a big target considering itll be paypals(mainstreams) btc holding spot) paypal takes no responsiblilty for your losses...... i think this isnt going to last long once news gets out, unless they change things and maybe take some liability.
Do you have any proof for this? I don't think that they will be stupid enough to store their coins in some shitty exchange, after all the exchange robberies and hacks we had in the past. But I know one thing for sure. For PayPal, insuring the cryptocurrency deposits is not going to be a big thing. They have billions of $$$ in cash reserves and even if all of their coins get hacked, they can easily reimburse their users (unlike the cryptocurrency exchanges).