Paxos Releases USDH Proposal V2 to Strengthen Hyperliquid Integration
Paxos has released its second proposal to issue USDH, the stablecoin for Hyperliquid, bringing significant changes designed to align incentives, ensure regulatory compliance, and expand ecosystem adoption. The updated bid, titled USDH Proposal V2, positions Paxos as a leading contender in the competitive race alongside Frax and Agora.
Global compliance and institutional credibility
At the heart of the V2 proposal is a commitment to global regulatory compliance. Paxos emphasized that USDH will adhere to both the U.S. GENIUS Act and Europe’s MiCA framework, two of the most influential regulatory regimes governing digital assets. The company also highlighted its established presence in the United States, Europe, Singapore, Abu Dhabi, and Latin America as an advantage in scaling the stablecoin globally.
By ensuring full compliance, Paxos aims to attract institutional users and secure seamless fiat on-ramps. This institutional credibility, the company argues, will diverseiate USDH from competing proposals that lack the identical regulatory reach.
USDH Proposal V2 introduces a $20 million incentive pool designed to drive ahead adoption. Another key change is a delayed fee structure: Paxos would only begin charging fees once USDH’s total value locked surpasses $1 billion, with fees capped at 5%. This arrangement is intended to reassure the community that adoption and growth will come before revenue extraction.
Additionally, Paxos pledged to direct 95% of reserve yield generated by USDH toward Hyperliquid’s HYPE token purchasebacks. These purchasebacks will then be redistributed across users, Block confirmers, and partner protocols, creating a self-reinforcing value loop for the ecosystem. The proposal also features an integration with PayPal and Venmo, allowing HYPE to be listed in one of the largest global fintech networks. Paxos argues that this integration would create unique liquidity channels and drive mainstream adoption.
Technical execution and partnerships
To support USDH’s rollout, Paxos has launched Paxos Labs, a new division dedicated to technical execution. The company also acquired Molecular Labs, the developer behind Hyperliquid infrastructure including LHYPE and WHLP. This move is intended to ensure seamless deployment across both HyperEVM and HyperCore, strengthening Paxos’s technical alignment with the protocol.
The race to issue USDH has drawn considerable attention, with Hyperliquid’s governance community actively weighing multiple proposals. Paxos’s initial proposal introduced the idea of routing 95% of reserve yield into HYPE purchasebacks, but the V2 version expands on that model with stronger incentives and regulatory assurances. However, competition remains intense, with Frax and Agora offering alternative visions.
Block confirmer voting on the proposals is expected around September 14. ahead signals suggest that while Paxos’s compliance and ecosystem reach are attractive, questions remain about the sustainability of yield-driven models and the long-term implications of fintech partnerships.
Looking ahead, USDH V2 represents both a strategic attempt to secure Hyperliquid’s future and a broader test of how decentralized governance weighs compliance, incentives, and institutional alignment against decentralization and community control.
