Hyperliquid stablecoin fight for USDH heats up amid fairness concerns

Hyperliquid’s push to launch USDH has triggered a high-stakes competition among both corporate and DeFi players, each pitching unique strategies. As the Sept. 14 vote approaches, questions are mounting over whether the process genuinely favors the most capable bidders or leans toward certain entrants.

Hyperliquid is moving toward launching its own stablecoin, USDH, which has kicked off a competitive race among corporate and DeFi-focused teams, as the exchange recently issued a request for proposal for the USDH ticker, with the winning firm potentially handling billions in trading volume and a significant portion of reserve revenue.

The decision to launch a brand-new stablecoin seems aimed at cutting reliance on Circle‘s USDC stablecoin, which currently makes up most of Hyperliquid’s roughly $5.5 billion in reserves and generates approximately $200 million a year for Circle.

Creating USDH could let Hyperliquid keep more of that yield in-house and gain greater control over liquidity and reserve management, giving users a more direct role in the platform. As of press time, the RFP has attracted a wide range of contenders, with each taking a somewhat different approach:

• Ethena Labs proposes a USDH fully backed by USDtb, a stablecoin connected to BlackRock’s BUIDL fund and soon to be issued through Anchorage Digital Bank. They’ve pledged to return 95% of net revenue from USDH reserves to the Hyperliquid ecosystem and cover the costs of migrating existing USDC trading pairs.
• Paxos, a stablecoin issuer better known for its involvement in Binance’s BUSD and PayPal’s PYUSD, has submitted a proposal to launch USDH aiming to integrate PayPal and Venmo rails into the USDH ecosystem. Paxos emphasizes regulatory compliance with NYDFS and EU MiCA rules and plans to direct 95% of reserve yield to HYPE buybacks.
• Frax Finance plans to mint USDH at parity with frxUSD and Treasuries, channeling all Treasury yield to Hyperliquid users, focusing on leveraging decentralized finance mechanisms to enhance yield distribution for USDH holders.
• Sky Ecosystem, formerly known as MakerDAO, proposes a decentralized issuance model offering a 4.85% yield, backed by an $8 billion balance sheet. They also plan to integrate their buyback system into Hyperliquid and fund a Hyperliquid Star initiative to support platform growth.
• Agora, a privacy-focused DeFi protocol, has committed 100% of net income from USDH to platform support funds or HYPE token buybacks. Their proposal emphasizes community-driven growth and sustainability within the Hyperliquid ecosystem.
• Native Markets positions itself as fully aligned with Hyperliquid and proposes a 50/50 split of yield between platform growth and the Assistance Fund, trying to balance ecosystem development with user support initiatives.

Sam, a research analyst at Messari, also known under the alias @0xCryptoSam, explained in an X post that the “number one priority for USDH is a long-term, synergistic partner,” suggesting that alignment ultimately comes down to revenue potential and the value of Hyperliquid’s HYPE token.

According to the analyst, table stakes include GENIUS compliance, high HYPE buybacks, diversified collateral, and deep liquidity. And as of press time, Ethena’s proposal stands out, Sam writes, adding further that the firm’s stablecoin goes beyond a standard t-bill-backed model.

“What I find most interesting about the Ethena proposal is their commitment to grow the USDH product beyond what USDC does today. Their proposal to launch reward-incentivized collateral and a prime brokerage to use different underlying assets (e.g., BTC, HYPE, or USDe) for collateral stood out to me as unique from other USDH proposals.”

@0xCryptoSam

Paxos, for example, offers a more conventional path for institutions and whales, with regulatory reassurance and an established track record, whereas Frax and Sky appeal to the DeFi community by prioritizing transparency and yield flows. Native Markets leans heavily on platform alignment, but its lack of prior stablecoin experience introduces additional uncertainty.

The final vote on Sept. 14 will show how Hyperliquid is planning to balance regulatory compliance with DeFi ambitions. While many teams are rushing to submit competitive bids, concerns remain about how seriously some proposals are being considered.

Haseeb Qureshi, partner manager at Dragonfly, called the USDH RFP “a bit of a farce” in an X post on Sept. 9, saying bidders suspect validators are all-in on Native Markets.

“Native Markets’ proposal came out almost immediately after the USDH RFP was announced, implying they had advanced notice. Everyone else scrambled over the weekend to put something together. So this whole USDH RFP was basically custom made for Native Markets.”

Haseeb Qureshi

Qureshi added in a follow-up post that many bidders think the process was already stacked in favor of Native Markets, adding that more than half of the USDH bidders privately agreed but stayed quiet to avoid backlash.