Hyperliquid’s Crucial Stablecoin Battle: The Intense Race for USDH Issuance

The decentralized finance (DeFi) world watches closely as Hyperliquid, a rapidly growing perpetual futures exchange, prepares for a pivotal vote. This decision will determine the issuer of its first native stablecoin, USDH. The stakes are incredibly high, with billions in trading volume and stablecoin flows on the line. Several prominent companies are fiercely competing for this coveted role, marking one of the industry’s most closely observed community decisions.

Hyperliquid’s Ascent and the USDH Imperative

Hyperliquid has quickly established itself as a major player in decentralized finance. The platform launched its own layer-1 in November 2024. It handled an astonishing $330 billion in trading volume by July. This achievement came from a lean team of just 11 people. Now, Hyperliquid seeks to integrate a native dollar-pegged asset. This asset, USDH, will serve multiple critical functions. It will provide traders with a stable unit of account. Furthermore, it offers a reliable collateral option within the Hyperliquid ecosystem. The choice of issuer will grant significant control over the exchange’s canonical stablecoin. Consequently, it opens access to immense stablecoin liquidity and flow.

The Fierce Stablecoin Contenders

The race for USDH issuance has attracted a diverse group of contenders. Each brings unique proposals and strategies to the table. The competition highlights the innovative spirit within the DeFi sector. Ethena initially joined the race but later withdrew its bid. It endorsed newcomer Native Markets, adding an early twist to the proceedings. The remaining field includes established giants and ambitious new projects. These entities are all vying for the opportunity to power Hyperliquid’s future.

Native Markets: The HyperEVM Challenger

Native Markets was the first team to submit a proposal for USDH on September 5. This group explicitly formed to launch a Hyperliquid-native stablecoin. Their plan pledges to mint USDH directly on HyperEVM. Moreover, they promise to split reserve yield evenly. This yield will go towards HYPE token buybacks and ecosystem growth initiatives. Native Markets relies on Stripe’s tokenization platform, Bridge, for reserve management. This choice initially garnered validator backing. However, it also sparked pushback from competitors. These rivals warned of potential conflicts with Stripe’s broader blockchain ambitions. The venture is led by Hyperliquid investor Max Fiege, former Uniswap Labs resident MC Lader, and blockchain researcher Anish Agnihotri. Polymarket currently gives Native Markets 96% odds of winning.

Paxos: The Regulated Powerhouse in the Hyperliquid Race

On the same day, September 5, stablecoin infrastructure company Paxos submitted its proposal. Paxos aims to launch USDH as a Hyperliquid-first stablecoin. Their design emphasizes compliance with both the US Stablecoins Act (GENIUS Act) and the European Union’s Markets in Crypto-Assets (MiCA) framework. The filing states that 95% of the interest generated from USDH reserves will be directed toward buying back Hyperliquid’s native HYPE token. This will then be redistributed to validators, users, and partner protocols. Paxos highlights its proven track record. They are the only firm to launch and scale multiple regulated stablecoins. These include Binance USD, which reached over $25 billion, and PayPal USD, which exceeded $1 billion. Paxos also pledged to integrate USDH into its brokerage platform. This platform is already utilized by major players like PayPal and Venmo. Polymarket currently shows Paxos with 4% odds.

Frax Finance: Community-First Tokenization for USDH

Decentralized finance protocol Frax Finance also entered the fray. Frax is the issuer of the frxUSD stablecoin. It outlined a proposal to issue USDH through a partnership with a federally regulated US bank. The bank’s name was not disclosed. Their plan involves backing USDH one-for-one with tokenized US Treasurys. This approach ensures full GENIUS Act compliance. Furthermore, Frax commits to recycling the entire treasury yield back into Hyperliquid’s ecosystem. Frax described its strategy as ‘something no one else will match: give everything back to the community.’ Polymarket indicates Frax Finance has less than 1% odds.

Sky and Agora: Innovative Approaches to Stablecoin Issuance

On September 8, Ethereum DeFi pioneer Sky, issuer of the USDS stablecoin (formerly DAI), submitted its proposal. Sky’s pitch uniquely pledges to make USDH natively multichain via LayerZero. This would allow the token to circulate across various networks from day one. The team also committed to deploying part of its balance sheet into Hyperliquid. This offers the community a 4.85% return on USDH. Profits will also go towards HYPE buybacks and the Assistance Fund. Sky’s current odds on Polymarket are less than 1%.

Also on September 8, Agora, the issuer of the AUSD stablecoin, put forward a proposal. They plan to launch USDH with VanEck as their asset manager. Agora’s bid features a commitment to direct 100% of net revenue from reserves into HYPE buybacks or the Assistance Fund. Agora sharply criticized Native Markets’ reliance on Stripe’s Bridge. They warned that Stripe’s plans for its own Tempo blockchain could create conflicts of interest for Hyperliquid. Nick VanEck, co-founder of Agora, stated on X: ‘If Hyperliquid relinquishes its canonical stablecoin to Stripe, a vertically integrated issuer with clear conflicts, what are we all even doing? We strongly urge caution against using Stripe (Bridge) as an issuer.’ Agora’s current odds on Polymarket are less than 1%.

The Remaining Competitors and Voting Mechanics

Three last-minute bids emerged on September 10, the final day for proposals. These bids have not yet appeared on Polymarket’s prediction markets. They came from Curve, the Ethereum-based decentralized exchange known for its stablecoin pools. OpenEden, a real-world asset tokenization platform, also submitted a bid. Finally, BitGo, a US crypto custodian and trust company, joined the race. The USDH vote represents Hyperliquid’s first major governance decision beyond routine asset delistings. Voting will occur entirely on-chain. This critical period is scheduled between 10:00 and 11:00 UTC on Sunday. Validator power will be determined by the amount of HYPE tokens staked. Delegators are free to shift their support during this time. A proposal requires two-thirds of the total stake to pass. However, the Hyperliquid Foundation and staking provider Kinetiq, which together control about 63% of tokens, have pledged to abstain. This setup ensures a truly decentralized outcome. The anticipation surrounding the vote has coincided with a rally in HYPE. The token hit a new all-time high of $57.30 on Friday, according to CoinGecko data.

The Tremendous Stakes for Hyperliquid and USDH

The outcome of this vote carries immense implications for Hyperliquid’s future trajectory. The chosen issuer will gain significant influence over the platform’s financial infrastructure. Access to billions in stablecoin flows could transform their operations. Furthermore, the successful integration of USDH will enhance Hyperliquid’s utility and appeal to traders. It provides a stable and reliable asset for collateral and trading. This decision also reflects the growing trend of decentralized exchanges seeking native stablecoin solutions. Such solutions reduce reliance on external, potentially less aligned, assets. The rally in the HYPE token underscores investor confidence. They believe in the platform’s growth and the importance of this upcoming governance event. The entire DeFi community watches intently. They seek to understand the future direction of this innovative exchange and its native stablecoin.