Paxos backs Hyperliquid with proposal to support USDH stablecoin launch

Stablecoin company Paxos submitted a proposal on Saturday to the Securities and Exchange Commission (SEC) to support Hyperliquid’s launch of the USDH stablecoin. USDH will be deployed on both HyperEVM and HyperCore.

The company ensures global distribution compliance with the U.S. GENIUS Act, Europe’s MiCA, and regulatory frameworks across APAC, the Middle East, Latin America, and Africa. Paxos believes its global compliance coverage and connectivity to consumer banking will enable Hyperliquid to transition from an ecosystem for crypto natives to a financial platform for global users.

Paxos plans to use USDH yield for HYPE buyback and redistribution 

Paxos said its mission has always been to scale access to on-chain finance by partnering with platforms while maintaining enterprise-grade security, technology, and compliance. According to the company, USDH has a revenue-sharing mechanism that supports HYPE, and the validators. It ensures compliance and scale to match Hyperliquid’s rapid growth. 

Hyperiquid was the first to introduce the concept of sharing exchange revenue with those who drive volume to its protocol. Paxos said its USDH will boost the initiative to allow those who contribute to the growth of the stablecoin to retain a share of the underlying revenue.

The company plans to use 95% of the interest generated by its reserves backing USDH to repurchase HYPE and redistribute it back to ecosystem initiatives. Paxos plans to hold the highest quality reserves of T-Bills, Repos, and USDG, acknowledging that USDH will be required to be supported by U.S. market makers and exchanges.

According to the report, revenue share will equal the USDH balances and volumes across partnering Hyperliquid platforms. The redistribution initiative aims to allocate the bought-back HYPE among protocols, validators, and users.

Paxos argued that Hyperliquid’s next phase of growth requires the trust of institutions and consumer enterprises that want to interact on-chain. The firm hopes to use its global enterprise distribution to integrate Hyperliquid into the global financial system by expanding beyond crypto-native users towards major enterprises. 

Kotecha revealed that Paxos Labs has acquired Molecular Labs in a bid to accelerate stablecoin adoption in the Hyperliquid ecosystem. Molecular Labs is the infrastructure provider behind LHYPE and WHLP, which have powered the Hyperliquid ecosystem since HyperEVM launched.

Paxos said LHYPE will contribute to the Hyperliquid ecosystem since it utilizes Hyperlend, HypurrFi, Felix, and is deployed on Pendle, HypurrFi, and other decentralized exchanges (DEXs). WHLP aims to enable composability with Hyperliquid’s foundational yield source deployed on DEXs.

The tokenization platform stated that the USDH stablecoin is purpose-built to drive global adoption and align incentives with builders and users on Hyperliquid. The blockchain company also plans to add support for HYPE as an asset within Paxo’s brokerage infrastructure. 

Hyperliquid seeks proposals from teams ready to launch USDH

Hyperliquid said it’s launching its dollar-pegged asset in its network upgrade and is opening the process to competition among development teams to submit proposals. The firm said that after a validator quorum approves a candidate, the chosen team will still need to win a gas auction before deployment goes live.

Omar Kanji, partner at Dragonfly, explained that Hyperliquid’s initiative could significantly impact existing stablecoin providers on the protocol. According to him, the initiative could disrupt Circle’s USDC, which is currently the main settlement stablecoin for derivatives trading on Hyperliquid. 

Kanji believes that a complete switch to USDH could generate an additional $220 million in annualized revenue for HYPE token holders, based on a 4% yield assumption. He also stated that the migration would cut into Circle’s revenues by the same amount. The tech executive also mentioned that the initiative would represent a 7% reduction in USDC’s outstanding supply, currently sitting at $5.5 billion on the platform.

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