Paxos Bolsters USDH Stablecoin Proposal with PayPal and Venmo Collaboration

Paxos, a leading stablecoin issuer, has unveiled updated plans to launch its USDH stablecoin on the decentralized exchange Hyperliquid (HYPE). These revised proposals include strategic partnerships with payment giants PayPal and Venmo to enhance adoption and functionality, marking a significant milestone for the stablecoin ecosystem.

Strategic Integration: PayPal and Hyperliquid Support

On Wednesday, Paxos expanded on an earlier proposal submitted days prior. Cointelegraph reported that PayPal has officially committed to supporting the Hyperliquid ecosystem. This support involves listing the HYPE token on its platforms, providing fee-free on-and-off ramp services for USDH, and enabling both USDH and HYPE tokens as payment options through PayPal Checkout functionalities.

The move positions PayPal as a critical enabler within the Hyperliquid ecosystem and the broader USDH rollout. Paxos views this integration as essential to driving both ecosystem development and user adoption of the stablecoin, leveraging PayPal's expansive payment network and consumer base.

PayPal Incentives and Venmo Integration

As part of the strategic partnership, PayPal has pledged to invest $20 million (KRW 27.7 billion) to strengthen Hyperliquid’s infrastructure. This funding, aimed at fostering ecosystem growth, underscores PayPal's commitment to decentralized finance (DeFi) innovation and stablecoin adoption.

Additionally, Paxos plans to integrate USDH into PayPal-owned services such as Venmo and Xoom. Venmo, widely recognized for peer-to-peer payments, provides an opportunity for seamless stablecoin transactions, while Xoom enhances the global remittance potential of USDH.

Through its regulated status in the European Union, Paxos seeks to establish USDH as a globally distributed stablecoin with deep liquidity and accessibility across borders. Paxos emphasized the interconnected nature of both companies’ success, stating, “Hyperliquid’s success paves the way for Paxos’ success.”

Revenue Model and Incentive Framework

The Paxos revenue strategy aligns with ecosystem growth milestones. Paxos has committed to forgoing revenue generation until the total value locked (TVL) within Hyperliquid reaches $1 billion (approximately KRW 1.39 trillion). Once TVL surpasses $1 billion, Paxos will begin levying a 1% fee, increasing incrementally to a maximum of 5% once TVL exceeds $5 billion (KRW 6.94 trillion).

At the initial development phases, up to 80% of all revenue generated will be allocated to ecosystem development initiatives, gradually tapering to 25% as TVL expands. This fund allocation prioritizes reinvestment into the platform's growth while still earmarking resources for long-term sustainability.

Paxos has designed a protocol-owned treasury called the assistance fund. This treasury collects ecosystem fees and uses them to purchase HYPE tokens from the market, ensuring stability and insurance backup for Hyperliquid. The assistance fund functions as a safety mechanism, further boosting confidence within the ecosystem.

Intensifying Competition for USDH Issuance

The rollout of USDH is accompanied by fierce competition among various firms vying for issuance rights. On Monday, a coalition comprising MoonPay, Agora, and Rain submitted a joint proposal that directly opposed a rival bid indirectly controlled by Stripe, a major financial player. Agora’s CEO, Nick van Eck, criticized Stripe’s vertical integration model, calling it a “clear conflict of interest.”

On Tuesday, Athena Labs (ENA) entered the competitive bidding process as the sixth contender. Athena Labs proposed using collateral tied to USDtb, a stablecoin supported by BlackRock's BUIDL fund, to back USDH issuance. This proposal stands as a testament to the complexity and high stakes within the stablecoin sector.

Looking Ahead: USDH’s Evolution in DeFi

As USDH’s development intensifies, Paxos is leveraging well-coordinated strategic partnerships, robust revenue structures, and incentive-forward ecosystem development to position itself as a leader in stablecoin innovation. The collaboration with PayPal and Venmo signals a potentially transformative phase for USDH in integrating traditional payment systems with decentralized finance solutions.

At the same time, the competition for issuance rights highlights the growing interest and investment in stablecoins as key pillars of the evolving DeFi landscape. With the Hyperliquid ecosystem’s trajectory linked to USDH’s success, the stablecoin is likely to attract widespread attention as Paxos refines its strategies for scalability and market penetration.