Exact same ebay issue here - the same error message trying to checkout using my PayPal balance. I re-installed both apps so they're current (ebay 6.21.0.5), tinkered with setting changes, etc., but the issue persists. Since this issue started about the same time as ebay's move to further distance itself from PayPal, I think this is by ebay design.
I found a 2-part solution which has worked thus far - I simply choose "credit card" for checkout instead of "PayPal". Works flawlessly, just like it did 3 weeks ago (and for the past decade) when I used PayPal. Thus, my contention this is by ebay design, not a glitch. Could be, we'll see if they fix it in future updates.
Soapbox time: I would prefer to use my PayPal balance as I sell on ebay as that would build up my spendable allowance. Now ebay dumps procees into my bank account as cash which could be considered a good, convenient process, but they should give users the choice. It all comes out in the wash, but I have my preferences and reasoning for the selections I make.
Part 2 of my 2-part solution is to buy off Amazon. If I have to pay with a credit card, I might as well use Amazon. I rarely have to do a return but I know, beyond a shadow of a doubt, that if I have an issue then Amazon has my back. Anyone that has had problems with an ebay transaction and needed support will likely concur that this is a 180-degree difference with ebay's support. Non-existent. "So sad, too bad."
Going forward, I'll still use eBay to list items as they have a large user base, unless it's easier to sell local then I only list on Nextdoor - and don't pay transaction fees. Although I try to buy a lot from local brick-and-mortar stores to support owners or companies that actually value walk-in business, most of my online purchases have moved to Amazon.
