Hyperliquid is pushing ahead with plans to launch USDH, its own stablecoin, in a move that could reshape the platform’s $5.5 billion reserves and reduce its reliance on Circle’s USDC. But as the Sept. 14 vote approaches, the contest to decide who will issue USDH has turned into a high-stakes battle raising questions about fairness and favoritism.
Why Hyperliquid Wants USDH
Currently, most of Hyperliquid’s reserves are held in USDC, generating about $200 million annually for Circle. By creating USDH, Hyperliquid hopes to keep more of that yield in-house, strengthen control over liquidity, and give users a direct stake in the platform’s growth.
The exchange opened the process through a request for proposal (RFP), inviting corporate and DeFi players to pitch their versions of USDH. The winner could end up handling billions in trading volume and securing a lucrative slice of reserve revenue.
The Bidders and Their Proposals
🔹 Ethena Labs – Plans a USDH fully backed by USDtb, linked to BlackRock’s BUIDL fund and issued via Anchorage Digital Bank. They’ve promised to return 95% of net revenue to Hyperliquid and cover costs of migrating trading pairs from USDC.
🔹 Paxos – Best known for powering PayPal’s PYUSD and Binance’s BUSD, Paxos emphasizes regulatory compliance under NYDFS and MiCA. Their proposal includes integrating PayPal and Venmo rails into USDH and directing 95% of yield into HYPE buybacks.
🔹 Frax Finance – Wants to peg USDH to frxUSD and Treasuries, sending all Treasury yield directly to Hyperliquid users. Their approach leans on DeFi-native yield mechanisms.
🔹 Sky Ecosystem (formerly MakerDAO) – Proposes a decentralized model with a 4.85% yield backed by an $8B balance sheet. They also want to integrate buybacks into Hyperliquid and launch a “Hyperliquid Star” initiative for ecosystem growth.
🔹 Agora – A privacy-focused DeFi protocol pledging to send 100% of net income from USDH reserves into platform support funds or HYPE buybacks, framing it as a community-driven growth model.
🔹 Native Markets – Marketed as fully aligned with Hyperliquid, their proposal suggests splitting yield 50/50 between platform growth and an Assistance Fund. However, their lack of prior stablecoin experience has raised concerns.
Analyst and Community Reactions
Crypto analyst Sam (@0xCryptoSam) noted that the key to USDH’s success will be finding a “long-term, synergistic partner.” According to Sam, proposals must include compliance, strong HYPE buybacks, diversified collateral, and deep liquidity.
Ethena’s proposal stood out to him for going beyond standard treasury-backed models by offering reward-incentivized collateral and even the potential to use assets like BTC, HYPE, or USDe.
Meanwhile, Paxos appeals to institutions with its regulatory assurances, while Frax and Sky cater to DeFi users by focusing on yield and transparency. Native Markets, on the other hand, has attracted suspicion.
Allegations of Favoritism
Concerns about the process being rigged have been growing louder. Haseeb Qureshi of Dragonfly called the RFP “a bit of a farce,” arguing that Native Markets appeared to have advance notice. Their proposal was published almost immediately after the RFP went live, while other teams scrambled to prepare over the weekend.
According to Qureshi, more than half of the bidders privately agreed the process was tilted in favor of Native Markets but chose not to speak publicly for fear of backlash.
The Bigger Picture
The final decision on Sept. 14 will determine whether Hyperliquid’s stablecoin project becomes a regulatory-friendly institutional product, a DeFi-first innovation, or a hybrid model.
But the controversy over fairness underscores the stakes: whichever team wins will not only define USDH’s structure but also influence the future of Hyperliquid’s ecosystem, reserves, and the long-term value of the HYPE token.
