Lots of services like Bitinstant pays out via paypal.
There are numerous Bitcoins being sold on ebay, therefore paypal.
What's the official stance?
From another thread:
If you are only doing small person-to-person trades, infrequently and neither side has chargeback issues, you probably can keep trading bitcoins using PayPal for quite some time.
But when you start trading suddenly for larger amounts (e.g., more than a thousand dollars a month or a multiple of previous monthly average amount) or you start doing a ton of transactions -- especially involving funds from the buyer's credit card, or either you or your counterparty has chargebacks ... then you are playing with fire. And you will get burned.
Here's the specific terms:
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https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=ua/AcceptableUse_popupProhibited Activities
You may not use the PayPal service for activities that:
3. h) involve currency exchanges or check cashing businesses,
And if you'ld like to see a heartwarming story about the aftermath after Paypal realized some trader was selling bitcoins and followed that discovery by reversing 20 or so recent transactions and then freezing the funds, start here:
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http://bitcointalk.org/index.php?topic=83679.msg1001602#msg1001602And another thread where the eBay seller got his PayPal account frozen:
I got suspended for selling paperclips with free bitcoins 2 days ago, and yes i sent the damn clips with a tracking number. They want all kind of documents to re-enable my
account. I had only positive votes with them but the fees are killing me so i think i will pass doing something about it. They will get to know bitcoin in the end.