Paxos Partners with PayPal for its Hyperledger’s USDH bid

Stablecoin issuer Paxos has updated its proposal to issue USDH, the planned stablecoin of decentralized exchange (DEX) Hyperliquid, adding support from PayPal and Venmo.

In a Wednesday announcement, Paxos updated its Saturday proposal to issue USDH. The firm stated that “PayPal has committed to supporting the Hyperliquid ecosystem,” by listing the HYPE token, supporting the new stablecoin with free on and off-ramps and supporting both USDH and Hyperliquid (HYPE) for PayPal checkout.

PayPal would also provide $20 million in incentives committed to the HYPE ecosystem and integrate USDH into its payment app, Venmo, and money remittance service, Xoom. Paxos also stated that its regulatory standing in the European Union would allow its stablecoin to circulate there as well, “ensuring that USDH can scale globally.”

The update also aims to tie the issuer’s interest to that of the Hyperliquid ecosystem, promising that “Paxos only wins if Hyperliquid wins.” “Paxos takes nothing until we reach $1B in TVL and stays capped at 5% post $5 billion [total value locked] TVL,” Paxos said. “Any fees earned by Paxos through this milestone will be held in HYPE tokens,” it added.

Related: Paxos renews push for US bank license as stablecoin rules take shape

The incentives structure

After reaching $1 billion in TVL, Paxos starts earning 1% of the fees, and this percentage continues to scale up until it reaches 5% at a TVL of $5 billion or greater. In the initial phases, up to 80% of the funds are spent on ecosystem development, but as the TVL increases, this percentage decreases to 25%, as more money is allocated to Hyperledger’s Assistance Fund treasury.

The Assistance Fund is the protocol-owned treasury that receives platform revenues and fees to use them to market-buy HYPE. It works as a buyback and insurance fund for the ecosystem.

Related: Paxos settles with New York regulator for $48.5M over Binance partnership

The battle for USDH heats up

The update comes as multiple firms compete to issue USDH. On Monday, a coalition of crypto firms, including MoonPay, Agora and Rain submitted a joint proposal.

They opposed a proposal by an entity indirectly controlled by the financial giant Stripe. Agora CEO Nick Van Eck warned that Stripe’s vertical integration presented “clear conflicts.”

On Tuesday, Ethena Labs became the sixth bidder for Hyperliquid’s USDH stablecoin. The team behind USDe and USDtb proposes backing USDH with its USDtb stablecoin, tied to BlackRock’s BUIDL fund.

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