Upvoted for taking the time to explain the nuance: blocking VPN providers vs. blocking payments occurring over VPN.
I suspect (without supporting evidence) that PayPal is only doing this in response to external pressure (eg. from Netflix, RIAA, MPAA) rather than making the decision unilaterally. I think it's unfortunate that PayPal has caved. But from a business perspective, I can understand why they've decided to cave: The transaction volume is small relative to the cost of fighting the rights holders (in legal costs, but potentially even in the political arena). Like all other banks dealing with cutting-edge issues (eg. weed legalization), they're being cautious; they have a lot to lose.
I suspect (without supporting evidence) that PayPal is only doing this in response to external pressure (eg. from Netflix, RIAA, MPAA) rather than making the decision unilaterally. I think it's unfortunate that PayPal has caved. But from a business perspective, I can understand why they've decided to cave: The transaction volume is small relative to the cost of fighting the rights holders (in legal costs, but potentially even in the political arena). Like all other banks dealing with cutting-edge issues (eg. weed legalization), they're being cautious; they have a lot to lose.