IIRC they merged with x.com specifically because x had a banking license and they had gotten an EU license in the mid 2000’s.

Also banks can pick and choose in fact they do it all the time try asking for a loan form a bank as a porn production company or even opening a business account with one, most of them won’t touch you same goes for many other businesses.

Banks in some cases may not be allowed to deny services to individuals for non financial reasons they same does not hold true for businesses and organizations.

PayPal issues credit and loans and credit cards they are an issuing bank and they also serve as an acquiring bank for processing payments.

Their account balance may not count as deposit and as such that part might not be under banking regulations in the US but in the EU they are regulated as one.