Paxos Engineers Stablecoin to Bridge DeFi and Wall Street

Paxos has proposed the issuance of USDH, a stablecoin tailored for the Hyperliquid decentralized exchange, with a significant allocation of 95% of the interest earnings from its reserves directed toward HYPE token buybacks. This initiative, announced through a new entity—Paxos Labs—aims to enhance the Hyperliquid ecosystem by aligning economic incentives and fostering institutional adoption. USDH is designed to be fully compliant with U.S. regulatory frameworks such as the GENIUS Act and the European Union’s Markets in Crypto-Assets (MiCA) regulations, positioning it as a secure and scalable asset for both retail and institutional participants [1].

The proposal outlines a revenue-sharing model that distributes HYPE token buybacks proportionally based on USDH balances and trading activity on Hyperliquid’s platforms. These buybacks will benefit validators, protocols, and users, reinforcing the platform’s decentralized governance structure. According to the plan, USDH will be deployed natively on Hyperliquid’s HyperEVM and HyperCore blockchains, with reserves held in Treasury bills, repurchase agreements, and USDG tokens. These collateral choices are intended to meet the institutional-grade requirements of major market participants [2].

Paxos’s initiative is backed by its recent acquisition of Molecular Labs, the infrastructure provider behind Hyperliquid’s LHYPE and WHLP tokens. The integration of Molecular Labs into Paxos’s operations enhances the firm’s understanding of the Hyperliquid ecosystem and allows for a more seamless deployment of USDH. Additionally, Paxos leverages its extensive experience in issuing stablecoins for major platforms including Binance, PayPal, Kraken, Robinhood, and OKX, which collectively have seen $160 billion in tokenized asset issuance across seven products [1].

Hyperliquid has demonstrated robust performance in the decentralized finance (DeFi) space, particularly in the perpetual futures trading segment. In August, the platform generated $106 million in trading revenue, representing a 23% increase from the prior month. The exchange also processed $383 billion in monthly trading volume, capturing a 70% market share in DeFi perpetuals. This performance underscores the growing demand for high-efficiency, low-cost trading platforms and supports the need for a stablecoin solution that can facilitate seamless cross-chain and institutional access [2].

The USDH deployment is part of a broader strategy to bring Hyperliquid into the mainstream financial ecosystem. Paxos plans to integrate HYPE into its existing brokerage infrastructure, which already supports crypto services for platforms such as PayPal, Venmo, and MercadoLibre. This integration is expected to expand Hyperliquid’s reach beyond the DeFi community and into traditional financial markets, supported by Paxos’s multi-jurisdictional compliance and established payment corridors across key markets in Latin America, the Middle East, and Asia [2].

Hyperliquid is currently undergoing a validator selection process to approve the USDH stablecoin, with Paxos emerging as the leading candidate due to its technical expertise and regulatory alignment. The platform has also reduced its trading fees by 80%, further incentivizing users to engage with its ecosystem. As institutional interest in DeFi continues to grow, the introduction of USDH is seen as a strategic move to bridge the gap between decentralized exchanges and traditional financial infrastructure [1].

Source:

[1] Paxos Proposes to Issue USDH Stablecoin for Hyperliquid (https://finance.yahoo.com/news/paxos-proposes-issue-usdh-stablecoin-113000004.html)

[2] Paxos Proposes Stablecoin for Hyperliquid with HYPE (https://cointelegraph.com/news/paxos-proposes-usdh-stablecoin-for-hyperliquid)