Paxos Unveils USDH Proposal V2 with PayPal Integration and $20M Incentives

Highlights:

• Paxos has unveiled a USDH proposal with PayPal integration and an incentive program for adoption.
• Validators will vote on who will issue the stablecoin in a competitive selection process.
• Paxos will direct most reserve yield to HYPE token buybacks until adoption and TVL targets are reached.

Paxos released an updated version of its USDH proposal, targeting Hyperliquid’s upcoming stablecoin launch. The V2 proposal outlines a strategy to scale the Hyperliquid ecosystem globally. A major component is a partnership with PayPal and Venmo to integrate USDH across payment and checkout channels.

Stablecoin issuer Paxos released the USDH Proposal V2 on September 10, featuring three major upgrades: HYPE listed on PayPal/Venmo, USDH free on/off-ramps, and $20 million ecosystem incentives; Paxos can only earn revenue once the TVL target is met, capped at 5%, with all fees…

— Wu Blockchain (@WuBlockchain) September 10, 2025

The integration will also allow the listing of Hyperliquid’s native HYPE token. Users will gain free access to PayPal on/off-ramps. Paxos intends to offer up to $20 million in incentives to increase the use of HYPE, liquidity, and trading.

The proposal states that USDH will reinvest early revenue into the ecosystem and the Assistance Fund of Hyperliquid until the total value locked (TVL) hits $1 billion. Even when TVL reaches more than $5 billion, the revenue share payable to Paxos will be limited to 5%. The company points out that such measures ensure that its success is in tandem with the expansion of Hyperliquid.

The stablecoin has the potential to reach hundreds of millions of users around the globe by connecting USDH to the PayPal network. The integration includes Checkout, Braintree, Venmo, Hyperwallet, and Xoom as peer-to-peer payment, merchant payment, and remittance scenarios.

Paxos Unveils Compliance and Institutional Expansion in USDH Proposal

The revised plan focuses on adherence to the key frameworks, such as the GENIUS Act in the U.S. and MiCA in Europe. Paxos emphasized that it is the single institution entitled to issue stablecoins in Europe, which adds credibility to institutions.

The New York–based financial institution plans to repurchase HYPE tokens with 95% of the income from reserves. These buybacks will be useful to users, validators, and partner protocols, establishing a self-perpetuating ecosystem. The revenue model ensures the adoption precedes fee collection.

The V2 proposal also extends enterprise-based initiatives. The company will incorporate builder codes, bring asset issuers to the Hyperliquid open market creation system (HIP-3), and use HyperEVM to improve DeFi integration. Paxos Labs, the company’s new technical division, will oversee execution. The purchase of Molecular Labs, inventors of Hyperliquid infrastructure, will guarantee a smooth deployment, both in HyperEVM and HyperCore. There are also plans for an Earn product that is based on USDH and embedded into consumer applications.

Competition Intensifies as Validators Prepare to Decide on USDH Issuer

When it comes to issuing USDH, Paxos is up against some formidable competitors. Frax Finance, a decentralized stablecoin cryptocurrency protocol, has come forward with a proposal to back USDH with a fully collateralized stablecoin, frxUSD. A coalition of Agora, Rain, and LayerZero has pledged a 100% net revenue share. Other proposals came from Ethena Labs and Sky.

Proposal: Agora stablecoin infrastructure to power USDH with a coalition of best-in-class providers.

Introduction
If Hyperliquid relinquishes their canonical stablecoin to Stripe, a vertically integrated issuer with clear conflicts, what are we all even doing?

Summary
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— Nick van Eck (@Nick_van_Eck) September 7, 2025

Hyperliquid’s governance invited proposals with a submission deadline of September 10. Validators are scheduled to vote on the winner starting September 14. The Hyperliquid Foundation will not vote, and the choice will be left to the validators.

The competitive process emphasizes the increasing role of stablecoins in decentralized finance. The V2 proposal by Paxos connects adoption, compliance, and incentives to the growth of USDH, with other competitors focusing on neutrality and revenue approaches. The result will define the stablecoin ecosystem of Hyperliquid and a wider pattern of institutional integration and regulatory-friendly DeFi development.