It is ever so slightly possible, that Paypal is sounding the alarm, here. Here's the key phrase...
"...but PayPal has advised that MEGA's 'unique encryption model' presents an insurmountable difficulty,"
It looks like Paypal fought to keep MEGA as a customer. But "somebody" put the screws to them, and forced them to break contract with MEGA.
That's no small thing. Corporate contracts are a bit more "customer friendly", and simply dumping a corporate customer isn't quite as easy as it is to dump people like you and me. MEGA could take Paypal to court with a valid argument over breaking that contract.
What are they going to say? What would be their excuse? "We don't like encryption."??? No judge would buy that.
Based on what we're seeing, Paypal's previous history aside, it sounds rather like Paypal got served a National Security Letter telling them to dump MEGA.