When you’re logged into your test business account, manually navigate to:
https://www.sandbox.paypal.com/businessmanage/preferences/payments
You would normally be able to get there by going through your “My Business Setup” but currently it redirects to PayPal live (despite being in the sandbox).
Once you’re on that page, change “Block payments sent to me in a currency I do not hold” to “No, accept them and convert them to …”
Also, don’t forget to confirm your business account using the PayPal Sandbox front-end and “Test Email” section of the API.