Paxos Stablecoin USDG Natively Launches on Arbitrum
Cointelegraph reports that the stablecoin Global Dollar (USDG) issued by Paxos has launched on Arbitrum, with Arbitrum joining the Global Dollar Network. USDG is natively issued on Arbitrum One and is not mapped from other chains. On the first day, it was integrated with Fluid, Morpho, GMX, and Maple. Kraken will support deposits and withdrawals, while Stargate will support transfers between other chains.
CoinDesk's list is longer, also including Li.Fi, Gauntlet, Steakhouse, and LayerZero, with Uniswap and Fhenix following. GMX opened the USDG liquidity pool incentives on the same day, with Morpho's side featuring Gauntlet's USDG vault, and the second vault from Steakhouse joining afterward. Rewards are distributed via Merkl. Brendan Ma, head of investment strategy at the Arbitrum Foundation, stated that builders can thus share in the growth rewards.
A proposal submitted to ArbitrumDAO aims to list USDG growth as a strategic goal and add 100 million ARB to the DRIP incentive program. The proposal also requests the use of treasury assets to support USDG liquidity, allowing businesses integrating the stablecoin to apply for support from the Arbitrum Foundation. This is a proposal, not an already approved grant. A forum post indicates that if approved, the remaining budget for DRIP will increase to approximately 165 million ARB, consolidating the second to fourth quarters into a single USDG quarter.
As a partner in the Global Dollar Network, Arbitrum will share the rewards generated by USDG on its network, which will be used for adoption and ecosystem building. CoinDesk notes that Arbitrum currently cannot directly share in the reserve earnings from the stablecoins already in circulation. USDG is backed 1:1 by USD reserves.
Cointelegraph cites DeFiLlama stating that USDG has a circulation of approximately $3.09 billion, making it the seventh-largest stablecoin by market cap. The Arbitrum Foundation claims that the online stablecoin supply is about $4 billion. CoinDesk cites another figure of approximately $3.8 billion, with Circle's USDC accounting for about 60%.
Buyers are USDG holders looking to lend, trade perpetuals, and make payments on Arbitrum, while sellers are Paxos issuing and protocols providing liquidity pools. This is an issuance plus proposal, not a grant that has been implemented. Reserves and rewards flow to the Paxos network, and if ARB incentives are approved, they will flow from the DAO to USDG liquidity. Paxos, the integrated protocols, and Arbitrum will benefit from the revenue sharing, while USDC, which already dominates online stablecoins, faces pressure.
Source: Public Information
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Paxos is using USDG for reserve revenue sharing, not just issuing a single-chain token. There are already about $4 billion in stablecoins on Arbitrum, with USDC accounting for about 60%, but the chain itself cannot earn from these reserve interests. After joining the Global Dollar Network, the activity rewards of USDG on this chain can be shared with Arbitrum and reinvested into adoption.
The 100 million ARB is still in the proposal stage. What has already started is the budget for the second season of DRIP, with GMX liquidity pool and Morpho vault first integrating USDG. The proposal aims to consolidate subsequent seasons into one focused solely on USDG and allow treasury assets to be used for self-liquidity. The incentives are one-time, while reserve sharing is ongoing.
The approach is similar to Circle's use of USDC for Layer 2 settlement and PayPal's use of PYUSD for distribution among exchanges and chains. The difference is that Paxos is sharing reserve earnings with the chain and partners. The industry is in a phase of stablecoin alliances competing for distribution, with OpenUSD engaging card organizations and exchanges, and the European Banking Alliance also forming its own dollar alternative.
The essence is a transfer of pricing power. The interest spread of stablecoins originally remained with the issuer, with the chain only providing blocks. USDG shares part of the rewards with Arbitrum in exchange for native issuance and DAO incentives. USDC still dominates the supply, while USDG is purchasing new liquidity and revenue-sharing contracts, not immediately replacing the existing supply.
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- Existing stablecoins do not share revenue; new coins do.
- Incentives will expire, but reserve earnings will not.
- The proposal has not passed, but the pool has already opened.