We really need to stop using the "scam" word as a sort of synonym to "bad service"; because obviously there's a HUGE difference between the two.
I agree to a point, but there is a limit.
If it transpires PayPal are operating fractional reserve, then I'd be inclined to call it a scam. They'd be selling something that doesn't necessarily exist. Those who understand how fiat works begrudgingly accept the premise that fiat works that way. But it's wholly incorrect to accept the practice of Bitcoin IOUs which literally cannot be spent on the blockchain. That would be a step too far and is 100% a scam. Best we reserve judgement until their third party custodian, Paxos, provide evidence of full reserve.
More fractional reserve banking is just what we need.
This is how they are going to FIATize crypto. Soon nobody will give a damn about bitcoin's limited supply.
But perhaps we should await some proof before we grab the pitchforks? I'm suspicious too, but facts are better to act upon.