Stablecoin infrastructure provider Paxos has outlined a plan to issue USDH, the first native stablecoin for the Hyperliquid ecosystem, under newly proposed regulatory standards. The submission, addressed to governance bodies overseeing the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS) and Europe’s Markets in Crypto-Assets (MiCA) framework, identifies compliance with legal tender and audit requirements as core components of the proposal.
The USDH design features an innovative revenue-sharing mechanism in which 95% of net interest earnings from fiat and high-quality reserve assets—principally U.S. Treasuries and repurchase agreements—will be redirected to HYPE token buybacks. The repurchased HYPE tokens are earmarked for distribution to network validators, ecosystem partners and active platform users, thereby reinforcing a circular incentive structure. Paxos Labs, a newly formed division within Paxos focused on decentralized finance integrations, spearheaded the initiative and facilitated the acquisition of Molecular Labs, the development team behind Hyperliquid’s LHYPE and WHLP primitives.
Paxos justification highlights institutional adoption as a driving factor. With extended partnerships across more than 70 financial institutions worldwide and ongoing integration with consumer payment platforms, the firm anticipates USDH bridging on-chain protocols with traditional banking rails. Proposed deployment across HyperEVM and HyperCore layer-1 chains aims to unify liquidity flows for decentralized perpetual futures markets and permissionless asset listings. Market data indicates that Hyperliquid captured over 70% market share in on-chain perpetual futures trading in August 2025, underscoring demand for protocol-native liquidity options.
The governance proposal outlines risk management safeguards, including dynamic reserve allocation protocols, auditing schedules and emergency stabilisation measures. A comprehensive audit trail leveraging on-chain observability tools and third-party attestations is set as a precondition for token issuance. Paxos anticipates that regulatory clarity from U.S. and EU authorities will mitigate systemic risk and establish a blueprint for future stablecoin developments. The presentation notes potential synergies with existing USD-pegged tokens, positioning USDH as a compliant option in a market dominated by Circle’s USDC and Tether’s USDT.
Analysts observe that the revenue-sharing approach aligns with Hyperliquid’s decentralized governance ethos, emphasizing direct value capture for protocol contributors. Validator communities have expressed tentative support, while institutional stakeholders highlight the role of stablecoins in cross-border settlements and yield generation strategies. Pending regulatory approvals, the project aims for a phased rollout in Q4 2025, with initial liquidity provisioning and validator incentives calibrated to maintain peg stability. Post-launch monitoring will incorporate volatility metrics and target reserve ratios to ensure market confidence in USDH as a next-generation stablecoin solution for enterprise and retail users alike.
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