I would prefer it if I didn't have to trust paypal word, and could cryptographically verify their fractional ratio - because in case of a boom, if everybody wanted to get their promises riches, that could also bankrupt paypal overnight.
Actually, the SEC may also want to check whether paypal promissory notes are actually backed by anything but thin air.
I highly doubt PayPal is playing that game. Bitcoin is highly volatile and can x10 its price easily. That could bankrupt PayPal overnight if people tried to sell in the short-squeeze.