Paxos Labs Proposes USDH Stablecoin with 95% Yield for Hyperliquid Ecosystem

Ronak Daya, Head of Product at Paxos, recently expressed enthusiasm for the emerging vision of Paxos Labs, stating, "Stoked to see the vision behind Paxos Labs starting to come to life! Only the start! 🚀" This sentiment underscores the significant strides made by Paxos Labs, a newly launched venture designed to bridge decentralized finance (DeFi) with institutional applications. The initiative aims to make on-chain products and DeFi markets more accessible and secure for institutional players.

Paxos Labs, incubated within Paxos, officially launched to facilitate the integration of DeFi into traditional financial systems. It provides infrastructure that allows fintechs and institutions to embed on-chain products, such as custom-branded stablecoins and yield-generating offerings, directly into their platforms. This strategic move positions Paxos Labs to capitalize on the growing institutional interest in the DeFi sector, reducing complexities and ensuring regulatory compliance.

A key development for Paxos Labs is its proposal to launch USDH, a Hyperliquid-first stablecoin, which includes a notable commitment to allocate 95% of its reserve yield towards buying back Hyperliquid’s native HYPE token. This mechanism is designed to align incentives across the ecosystem, attract institutional capital, and return value to users, validators, and partners. The proposal highlights Paxos's expertise in regulated stablecoin issuance, having previously supported PayPal USD (PYUSD) and Pax Dollar (USDP).

To bolster its capabilities for the USDH initiative, Paxos Labs acquired Molecular Labs, the infrastructure provider behind Hyperliquid's LHYPE and WHLP primitives. This acquisition deepens Paxos Labs' understanding of Hyperliquid's architecture and improves integration, ensuring seamless deployment of USDH on HyperEVM and HyperCore. The move is intended to connect Hyperliquid to traditional banking rails and regulated markets, leveraging Paxos's existing network of over 70 financial partners globally.

Hyperliquid, a prominent decentralized crypto derivatives exchange, generated over $106 million in revenue last month from nearly $400 billion in trading volume, holding approximately 70% market share in decentralized perpetual futures. The introduction of USDH, if approved by the Hyperliquid community, is expected to further enhance the platform's appeal to institutional investors and mainstream fintech platforms, moving beyond a "crypto enthusiast environment." Paxos Labs is also involved in other stablecoin initiatives, such as the yield-bearing Lift Dollar (USDL) issued by Paxos International.