Paxos Strengthens USDH Stablecoin Bid with PayPal and Venmo Support
Stablecoin issuer Paxos has enhanced its proposal to issue USDH, the upcoming stablecoin for decentralized exchange Hyperliquid, by securing backing from PayPal and Venmo. The update, announced Wednesday, follows Paxos’ initial submission last Saturday and introduces significant payment integration and a growth-aligned revenue model.
PayPal’s Commitment and Integration Plans
Paxos revealed that PayPal will support the Hyperliquid ecosystem by listing the HYPE token and facilitating free on- and off-ramps for USDH transactions. Additionally, both USDH and HYPE will be accepted for PayPal checkout, expanding the stablecoin’s usability.
PayPal has pledged $20 million in incentives to bolster the HYPE ecosystem and plans to integrate USDH into its payment app Venmo, as well as its money transfer service Xoom. Paxos also emphasized that its regulatory compliance within the European Union will enable USDH to operate and scale internationally.
Aligned Revenue Model Tied to Hyperliquid’s Growth
To align its interests with Hyperliquid’s success, Paxos proposed a revenue-sharing structure where it begins earning fees only after the platform reaches $1 billion in total value locked (TVL). The fee starts at 1% and scales up to a maximum of 5% once TVL surpasses $5 billion. Paxos commits to holding any fees earned in HYPE tokens, reinforcing its stake in the ecosystem.
Early in the growth phase, up to 80% of collected fees will be reinvested into ecosystem development. As TVL increases, the reinvestment share decreases to 25%, with the remainder channeled to Hyperliquid’s Assistance Fund—a protocol-owned treasury that uses revenues to buy back HYPE tokens and serve as an insurance mechanism.
Competitive Landscape Intensifies
Paxos’ updated bid arrives amid rising competition to issue USDH. Earlier this week, a consortium including MoonPay, Agora, and Rain submitted a joint proposal opposing a separate bid backed by Stripe-linked entities. Agora’s CEO, Nick Van Eck, highlighted potential conflicts of interest due to Stripe’s vertical integration.
Ethena Labs also entered the fray as the sixth bidder, proposing to back USDH with its USDtb stablecoin, which is linked to BlackRock’s BUIDL fund.
Outlook
The battle to issue USDH reflects broader tensions in the stablecoin sector as traditional financial players and crypto firms vie for influence. Paxos’ strategy to leverage PayPal’s payment network and align fees with ecosystem growth may provide a competitive edge, but regulatory scrutiny and rival bids remain significant hurdles.
FinOracleAI — Market View
Paxos’ enhanced USDH proposal, supported by PayPal and Venmo integration, is likely to positively influence market perceptions of the stablecoin’s adoption potential. The alignment of Paxos’ revenue with Hyperliquid’s growth incentivizes ecosystem success, which could drive user engagement and TVL expansion. However, competition from other bidders and regulatory uncertainties pose ongoing risks. Market participants should monitor developments in the USDH issuance process and regulatory responses closely.
Impact: positive
