Paxos Labs Launches USDH to Redefine DeFi Settlements and Token Value

Paxos has announced a proposal to launch USDH, a stablecoin specifically designed to support the Hyperliquid ecosystem and align with key global regulatory standards. The initiative, launched by a newly formed division, Paxos Labs, aims to enhance Hyperliquid’s position as a decentralized finance (DeFi) platform by bridging it to institutional investors and mainstream financial systems. The USDH stablecoin will be deployed across both the HyperEVM and HyperCore chains, with the goal of enabling broader adoption and compliance with frameworks such as the U.S. GENIUS Act and the EU’s Markets in Crypto-Assets (MiCA) regulations [1].

Central to the proposal is a revenue-sharing mechanism designed to benefit Hyperliquid’s stakeholders. According to the plan, 95% of the interest earned from USDH reserves will be used to repurchase Hyperliquid’s native token, HYPE. These tokens will then be redistributed to users, validators, and partner protocols, reinforcing the ecosystem’s growth incentives. Paxos has stated it will maintain reserves in high-quality assets such as U.S. Treasury bills and repos, ensuring that USDH remains stable and secure [1].

The strategic move is expected to strengthen Hyperliquid’s market position, particularly in the decentralized perpetual futures space. In the past month, Hyperliquid generated over $106 million in revenue, with nearly $400 billion in trading volume, capturing approximately 70% of the market for decentralized perpetual contracts [1]. By introducing USDH, Hyperliquid aims to streamline settlements and attract larger institutional participation. Paxos has also integrated HYPE into its brokerage infrastructure, which already supports crypto services for major platforms such as PayPal and MercadoLibre, further expanding access to institutional-grade financial tools [1].

Paxos Labs has acquired Molecular Labs, the developer behind key Hyperliquid infrastructure components LHYPE and WHLP, to deepen its understanding of the platform’s architecture. These tools facilitate composability with Hyperliquid’s yield sources and are deployed on various decentralized exchanges (DEXs). The integration of USDH is expected to enhance Hyperliquid’s on-chain financial architecture, supporting the platform’s transition from a crypto-native ecosystem to a broader financial infrastructure [1].

The potential impact of USDH extends to the broader stablecoin market. Omar Kanji of venture firm Dragonfly has highlighted that a full migration to USDH on Hyperliquid could redirect approximately $220 million in annualized revenue to HYPE token holders, based on a 4% yield assumption. This could also reduce Circle’s USDC revenue by a similar amount and cut the stablecoin’s supply by about 7%, currently valued at $5.5 billion on the platform. Analysts suggest that USDH’s integration could disrupt existing settlement mechanisms on Hyperliquid, reinforcing the platform’s leadership in decentralized derivatives trading [1].

Paxos emphasized its commitment to global compliance and security in the USDH proposal. The company has already secured partnerships with over 70 financial institutions and operates in major markets including the United States, European Union, Singapore, Abu Dhabi, and Latin America. By leveraging this infrastructure, Paxos aims to support Hyperliquid’s expansion into global financial markets, ensuring regulatory clarity and institutional trust. The initiative also includes a competitive process for development teams to propose USDH deployment, with the winning team required to secure a validator quorum and a gas auction before deployment [1].

Source:

[1] Paxos proposes USDH stablecoin for Hyperliquid (https://cointelegraph.com/news/paxos-proposes-usdh-stablecoin-for-hyperliquid)

[2] Paxos backs Hyperliquid with proposal to support USDH stablecoin launch (https://cryptorank.io/news/feed/1c5dd-paxos-proposes-to-back-hyperliquids-usdh)