Paxos Engineers Stablecoin to Fuel Hyperliquid's Ecosystem Growth

Paxos, a prominent fintech firm in the stablecoin sector, has released an updated proposal to issue USDH, a stablecoin tailored for the Hyperliquid decentralized exchange platform. The proposal underscores Paxos’s commitment to aligning with regulatory frameworks, including the U.S.-focused GENIUS Act and the European Union’s MiCA standards, to ensure full compliance. The initiative is led by Paxos Labs, a newly established division within Paxos, which has recently acquired Molecular Labs, a key contributor to Hyperliquid’s infrastructure. The integration of USDH into Hyperliquid’s ecosystem aims to enhance institutional access and expand the platform’s reach to global banking systems.

A key feature of the proposal involves a revenue-sharing model. Paxos plans to allocate 95% of the interest earned from USDH reserves toward repurchasing HYPE, the native token of Hyperliquid. These repurchased tokens will then be redistributed among users, validators, and partner protocols, creating a cyclical economic benefit for the Hyperliquid community. This approach aligns with broader goals of incentivizing participation and fostering ecosystem growth. The remaining 5% of the earnings will be retained by Paxos, with a cap placed on this share once USDH achieves $5 billion in total value locked (TVL). The proposed structure is designed to ensure that Paxos’s success is directly tied to the performance and expansion of Hyperliquid.

The USDH stablecoin will be deployed across both HyperEVM and HyperCore blockchains, ensuring native integration within Hyperliquid’s infrastructure. Paxos has emphasized its ability to provide multi-jurisdictional compliance, leveraging its existing banking licenses in Singapore and Abu Dhabi, as well as its operational presence in key financial markets like the U.S., EU, and Latin America. This regulatory and operational foundation is intended to make USDH an attractive option for institutions and fintech platforms seeking a compliant, scalable stablecoin solution. Additionally, the proposal includes a collaboration with PayPal and Venmo, enabling USDH to be integrated into their checkout and on/off-ramp services. This partnership is backed by a $20 million incentive commitment from PayPal to further support the HYPE ecosystem.

Hyperliquid’s dominance in the decentralized perpetual futures market positions USDH as a significant opportunity in the DeFi sector. The platform reported $106 million in trading revenue for August, with a 70% market share in DeFi perpetual futures trading, based on data from DefiLlama. With a lean team of 11 employees and $330.8 billion in annual trading volume, Hyperliquid has demonstrated remarkable efficiency and scalability. The potential to issue USDH through a competitive validator vote process has intensified interest among several major players, including Native Markets, Ethena, and Frax Finance. These firms are vying to secure the rights to build USDH, with Native Markets currently leading in betting odds on platforms like Polymarket.

Paxos’s revised proposal also introduces a new rewards system designed to reinvest USDH-generated revenue into growth initiatives until the stablecoin reaches $1 billion in TVL. This mechanism is intended to accelerate the token’s adoption and liquidity. The updated proposal outlines a vision for USDH to serve as a gateway for global DeFi adoption, leveraging Paxos’s existing partnerships with major financial institutions, including Stripe, Mastercard, and Robinhood. These partnerships are expected to play a crucial role in scaling USDH’s adoption and integrating the stablecoin into broader financial ecosystems.