Is PayPal a Legitimate Bank?

The Facts
In the United States, a bank is a financial institution, licensed by the government and providing specialized financial services to its customers.
Bank Regulation
A bank agrees to regulation by an industry-specific body of U.S. law, covering fraud, credit, liens, contracts, banknote issuance, privacy and other issues.
PayPal
In a June 2007 BusinessWeek article, Catherine Holahan explained that PayPal isn't a bank because it depends on other financial institutions such as GE Consumer Finance to provide many of its services. In a 2002 advisory letter, the FDIC said that as long as PayPal doesn't accept direct deposits, it won't be regulated as a U.S. bank. In Europe, however, PayPal does have a banking license.
Other Differences
Per its User Agreement, PayPal doesn't run credit checks for new accounts unless the user registers for a business merchant account.
Considerations
Though it's not a bank, PayPal's flexibility and lack of regulation may be a boon for consumers looking for a financial services provider that's less regulated, and has greater Internet purchasing access.