Hyperliquid's initiative to introduce its native stablecoin, USDH, has attracted competitive proposals from two major blockchain infrastructure providers: Paxos and Frax Finance. Each has presented distinct models for USDH's operation and benefits to the ecosystem.
Paxos, leveraging its experience from issuing regulated stablecoins like BUSD (which peaked at over $25 billion), emphasizes compliance and institutional reach. Its proposal, submitted on September 6, 2025, includes backing USDH with high-quality reserves such as U.S. Treasuries, repos, and USDG. Paxos commits to allocating 95% of interest earnings from these reserves to buy back HYPE tokens, distributing them to validators, protocols, and users to reinforce Hyperliquid's builder-code reward system. Additionally, Paxos plans to list HYPE across its brokerage network, which includes platforms like PayPal, Venmo, Nubank, MercadoLibre, and Interactive Brokers, enhancing institutional access.
Frax Finance offers a community-driven approach, proposing to back USDH one-to-one with its frxUSD and U.S. Treasury securities managed by firms like BlackRock. It promises to distribute 100% of the yield from treasuries directly to Hyperliquid users via on-chain mechanisms. Frax also highlights its multichain infrastructure, FraxNet, which connects over 20 networks, enabling cross-chain functionality for USDH while keeping it native to Hyperliquid. Governance would remain with Hyperliquid, allowing adjustments regardless of the issuer.
Hyperliquid, a decentralized exchange, has seen remarkable growth, generating $106 million in perpetual futures trading revenue in August 2025 (a 23% increase from July) and capturing 70% market share among DeFi perpetuals. The platform's efficiency, with only 11 employees handling $330.8 billion in annual volume, underscores the demand for a native stablecoin. Analysts project that USDH could generate $191 million annually in HYPE buybacks if it replaces USDC usage on Hyperliquid, creating a flywheel effect for the ecosystem.