Paxos, a prominent stablecoin issuer, has formally submitted a proposal to the Securities and Exchange Commission (SEC) to facilitate the launch of USDH, a new stablecoin intended for deployment across Hyperliquid’s HyperEVM and HyperCore platforms. This strategic move signals a concerted effort to integrate decentralized finance (DeFi) with robust regulatory compliance and institutional trust, potentially expanding Hyperliquid’s ecosystem from a crypto-native environment to a globally accessible financial platform. The initiative underscores a growing trend of established financial entities seeking to bridge traditional finance with the burgeoning digital asset space, emphasizing regulatory adherence as a cornerstone for broader adoption.
The core of Paxos’s proposal for USDH lies in its commitment to global regulatory compliance. The company asserts that USDH will adhere to international standards, including the U.S. GENIUS Act, Europe’s MiCA (Markets in Crypto-Assets) regulation, and various frameworks across the APAC region, the Middle East, Latin America, and Africa. This comprehensive compliance strategy, coupled with Paxos’s existing connectivity to traditional consumer banking, is designed to provide Hyperliquid with the necessary infrastructure to attract a wider user base, including institutional and enterprise clients who prioritize regulatory clarity and operational security.
Central to the USDH stablecoin’s economic model is a revenue-sharing mechanism designed to incentivize participation and foster ecosystem growth. Paxos plans to allocate 95% of the interest generated from USDH’s underlying reserves—comprising high-quality assets such as U.S. Treasury Bills, Repurchase Agreements (Repos), and USDG—towards repurchasing Hyperliquid’s native token, HYPE. This repurchased HYPE will then be redistributed among various ecosystem initiatives, including protocols, validators, and users. This model echoes Hyperliquid’s existing approach of sharing exchange revenue with contributors, aiming to reward those who drive the stablecoin’s growth and liquidity. The successful implementation will require support from major U.S. market makers and exchanges.
To accelerate its vision for Hyperliquid as a foundational platform for global decentralized finance, Paxos has established Paxos Labs. This new entity is dedicated to advancing stablecoin adoption within decentralized ecosystems and has already acquired Molecular Labs, an infrastructure provider instrumental in powering the Hyperliquid ecosystem since HyperEVM’s inception, specifically through LHYPE and WHLP. These components are designed to enhance the Hyperliquid ecosystem by enabling composability with its foundational yield sources and integrating with various decentralized exchanges. Paxos also plans to integrate HYPE as an asset within its broader brokerage infrastructure, further cementing its commitment to the Hyperliquid ecosystem.
In parallel with Paxos’s strategic efforts, Hyperliquid is actively soliciting proposals from development teams to launch USDH. Following a rigorous selection process that includes validator quorum approval and a competitive gas auction, the chosen team will deploy the dollar-pegged asset. This open competition approach could significantly reshape the stablecoin landscape within Hyperliquid, potentially disrupting the dominance of existing stablecoin providers. Omar Kanji, a partner at Dragonfly, highlights that Circle’s USDC currently serves as the primary settlement stablecoin for derivatives trading on Hyperliquid, and a successful USDH integration could have substantial implications for its market share.
Analyzing the potential economic impact, a complete transition to USDH on Hyperliquid could generate an estimated $220 million in annualized revenue for HYPE token holders, based on a hypothetical 4% yield assumption. Conversely, this shift would correspondingly reduce Circle’s revenues by a similar amount. Furthermore, such a migration could represent a notable 7% reduction in USDC’s outstanding supply on the Hyperliquid platform, which currently stands at approximately $5.5 billion. This illustrates the significant financial and competitive shifts that a widely adopted, Paxos-backed USDH could introduce within the broader DeFi ecosystem.
Michael combines data-driven research with real-time market insights to deliver concise crypto and bitcoin analysis. He’s passionate about uncovering on-chain trends and helping readers make informed decisions.