From my point of view, PayPal has a reasonable case to want to understand that its business partners are legally compliant if acting as a money service business

From my point of view, PayPal has a reasonable case to want to understand that its business partners are legally compliant if acting as a money service business. Your example is not really the same. If you started using your merchant terminal to take payments on your own off-brand money transfer service, you can be pretty sure that you're going to get cut off just as soon as your processor finds out.