Paxos has joined the list of firms vying to issue USDH, Hyperliquid’s native stablecoin. It is a New York-based infrastructure provider that powers crypto operations for PayPal, Venmo and Robinhood. The Paxos proposal for USDH includes a user-centric model that would return 95% of reserve earnings directly to token holders through buybacks and incentives.
As per industry experts, the proposal by Paxos changes who benefits—it’s the community now, not just the issuer. “Anyone holding or trading USDH gets a direct cut from the interest that Treasury securities and repurchase agreements generate,” they said.
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Banking Credentials Meet DeFi Innovation
Paxos has excellent credentials. The company runs the regulated infrastructure for major platforms like Kraken and MercadoLibre, handling billions in digital transactions. It’s one of the few crypto firms with full banking licenses in Singapore and Abu Dhabi—credentials that show it plays by international compliance rules.
What’s unusual is Paxos picked Hyperliquid even though the platform runs on a skeleton crew of just 11 people. The company saw past the small team size and spotted something valuable: profitability and technical features that made it perfect for testing this profit-sharing experiment.
It has also set up Paxos Labs specifically for pushing projects like USDH. Paxos Labs bought Molecular Labs, which built core Hyperliquid entities like LHYPE and WHLP, giving Paxos better access to how the platform’s financial features actually work.
Community Governance Holds the Keys
As per the Paxos proposal, USDH will run on both HyperEVM and HyperCore blockchains, working with Ethereum protocols while staying native to Hyperliquid. Paxos will back reserves with institutional assets—U.S. Treasury securities, repurchase agreements, and other rock-solid instruments.
The proposal now sits with Hyperliquid’s on-chain governance body, where community members vote yes or no on the proposals. This democratic setup puts the call in users’ hands instead of some central authority making the decision.
If Paxos gets the green light, USDH could change how stablecoins work in decentralized finance. Sending profits back to the people using the ecosystem should keep them engaged while bringing in institutional money that usually avoids less-regulated crypto ventures.
This marks Paxos’s latest push to connect traditional banking with cutting-edge DeFi protocols, potentially creating entry points for mainstream financial institutions that want to get into decentralized markets through proper and regulated channels.
