Hyperliquid’s ambition to launch its own digital dollar, called USDH, has drawn significant attention from two major players in the stablecoin industry.
Both Paxos and Frax Finance have presented competing proposals, each outlining a unique approach to the operation of USDH and its benefits for the broader digital ecosystem.
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Paxos Stresses Regulatory Adherence and Institutional Access for USDH
On September 6th, Paxos revealed its plan to introduce USDH, highlighting its experience with regulated stablecoins and established global partnerships.
The company believes that its history issuing BUSD, which at its peak reached a circulation of over $25 billion, provides the necessary expertise to create a stablecoin compliant with standards and regulations, including MiCA.
Paxos emphasizes that USDH would be backed by secure, top-tier assets, including US Treasury bonds, repurchase agreements, and USDG.
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“We have a long history of issuing regulated stablecoins, over seven years, and possess experience managing a very large stablecoin (BUSD) for the world’s leading exchange. This trust and reliability will help Hyperliquid engage with institutions and grow the entire Hyperliquid ecosystem significantly, potentially by a factor of 100,” stated Max Fantle, a Paxos executive, in a statement.
Paxos’s proposed revenue model allocates 95% of the yield generated from USDH’s reserve assets to the repurchase of HYPE tokens.
These tokens will then be distributed among validators, protocols, and users, reinforcing Hyperliquid’s reward system for contributors.
Paxos has also committed to listing HYPE on its brokerage network, which supports trading for prominent platforms like PayPal, Venmo, Nubank, MercadoLibre, and Interactive Brokers.
Frax Finance Proposes Yield Distribution and Cross-Chain Functionality
Frax Finance’s proposal takes a different approach, presenting its vision as a community-driven initiative.
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The company stated that USDH would be fully backed by their own frxUSD, alongside US Treasury securities managed by leading asset managers like BlackRock.
To drive adoption, Frax proposes easy redemption across frxUSD, USDC, USDT, and traditional fiat currencies.
Unlike Paxos, Frax aims to distribute the entire yield generated from the treasury assets directly to Hyperliquid users through on-chain mechanisms.
Frax also emphasizes FraxNet’s existing cross-chain infrastructure, connecting over 20 networks. This would enable USDH to function across multiple chains, while remaining native to Hyperliquid.
Frax concluded that Hyperliquid governance would retain final authority over USDH, possessing the power to modify the stablecoin’s structure irrespective of the selected issuer.