Paxos Labs published an updated version of its proposal to issue Hyperliquid’s upcoming USDH stablecoin amid a competitive bidding process against other stablecoin issuers.
The V2 proposal from Paxos, unveiled Tuesday, outlines a plan to scale the Hyperliquid ecosystem globally. This includes a partnership with PayPal aimed at expanding USDH distribution by integrating the stablecoin into PayPal’s checkout and payment channels.
The partnership will also enable PayPal and Venmo to list Hyperliquid’s native HYPE token and add USDH support to PayPal’s on/off-ramp products, accessible at no cost. In addition, PayPal is committing $20 million in incentives to the HYPE ecosystem.
Apart from the partnership, Paxos set forth an updated rewards system where revenue from USDH will be reinvested in growth and Hyperliquid’s Assistance Fund (AF) until the stablecoin’s total value locked (TVL) hits $1 billion. Paxos’ revenue share will be capped at 5% even after TVL crosses $5 billion, the proposal noted.
“Together, this framework ensures Paxos only wins if Hyperliquid wins, and USDH becomes the gateway stablecoin for global DeFi adoption,” Paxos said.
Paxos further highlighted its compliance with the GENIUS Act and said it is the only company that can legally issue tokens in Europe. It said it will add PYUSD as a reserve asset to ensure compliance and stability.
Hyperliquid for enterprises
The updated proposal stated that Paxos will help Hyperliquid become a liquidity infrastructure for enterprises, beyond its current retail-focused user base.
“Paxos has the ability to materialize this vision of scaling frontend access to Hyperliquid by working with fintech enterprises and brokerages to incorporate builder codes,” the proposal said.
For this initiative, Paxos aims to attract asset issuers into Hyperliquid’s open market creation system (HIP-3) and leverage HyperEVM to enhance DeFi integration. Paxos also plans to develop an “Earn” product using USDH, which will be integrated into consumer apps.
The updated proposal leverages Paxos’ established infrastructure, which provides stablecoin services for platforms including Stripe, Mastercard, Robinhood, Nubank, Mercado Libre, and Interactive Brokers.
Paxos faces stiff competition. Frax Finance, for instance, has put forward a proposal to back USDH with its frxUSD, which BlackRock’s BUIDL fund backs. Other contenders include a coalition of Agora, Rain, and LayerZero, which has pledged a 100% net revenue share and emphasized its neutrality. Ethena Labs and Sky also submitted their proposals.
This bidding war highlights Hyperliquid’s influence in the DeFi space and stablecoin’s growing significance. The decentralized perpetuals exchange announced its search for a USDH issuer last Friday, inviting proposals with a deadline of Sept. 10. Validators are scheduled to vote on the winner starting September 14, with the Hyperliquid Foundation abstaining.
© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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