I don't ever use Paypal, but the fact is that for mass adoption most people are just going to end up letting a third party, like paypal or their bank or their investment firm, custody their bitcoin, no different than how most casual bitcoin owners (in the US) just bought and keep theirs on Coinbase or perhaps some other exchange. Paypal or in a bank makes it easy and convenient for them to spend, and investment firm that they trust makes it easy for them to invest and not worry about it (though I would assume these sorts of companies will get insurance for the bitcoin they hold, otherwise its gonna be hard to build trust).

Though the tax rules on Bitcoin make actually spending it a huge headache so until that happens there is not reason to keep it in an account that allows you to spend it easily.

I'll stick to holding my own bitcoin, but for the majority of consumers out there custody from paypal and other institutions will just make more sense for them. I would even argue that having these third party custodians is GOOD. That's right, good. Because it increases adoption, and likely a small percentage of those people will then be interested enough in actually learning about Bitcoin and taking advantage of its features beyond price appreciation. Also for using it as a currency, well, Bitcoin is simply unusable on a mass scale cuz of its block size bottleneck, so unless Lightning Network takes off and is easy to use and its tradeoffs are worth it, 3rd parties will allow vastly more usage (and therefore ownership) of Bitcoin to take place because they can just batch tons of transactions together and decrease the data going into the blockchain. The hardcore crypto enthusiasts will hate this idea, but it will in fact improve usability and adoption of Bitcoin by a huge amount.