On September 5, 2025, the decentralized derivatives protocol Hyperliquid announced it would launch its native stablecoin, USDH, and introduce an on-chain transparent voting mechanism, allowing validators to collectively decide which team is best suited to oversee its issuance. The news quickly sent shockwaves through the industry, with several top-tier crypto companies joining the competition by submitting issuance proposals. Even derivative prediction markets have opened betting pools related to the outcome.
So far, six major institutions have officially entered the race for the issuance rights:
Native Markets was the first to submit a proposal just over an hour after the announcement. The company plans to issue USDH through Stripe’s stablecoin payment processor, Bridge. Its team brings extensive DeFi experience and institutional resources, with backgrounds in Hyperliquid ecosystem investments, Paradigm research, and Uniswap operations.
Veteran stablecoin issuer Paxos submitted its proposal on September 7, pledging that if selected, it would ensure USDH complies with the U.S. GENIUS Act standards and allocate 95% of reserve interest to repurchase HYPE and reinvest it into the ecosystem.
Frax proposed backing USDH 1:1 with its frxUSD, which is supported by BlackRock’s BUIDL fund. It committed to distributing 100% of the underlying returns to users through on-chain mechanisms without charging any fees.
Stablecoin startup Agora, in collaboration with Rain and LayerZero, jointly proposed dedicating all net income to HYPE repurchases and providing at least $10 million in initial liquidity, emphasizing a compliant structure and ecosystem-first approach.
Sky, a restructured entity originally from MakerDAO, proposed offering $2.2 billion in USDC for instant liquidity for USDH, along with a 4.85% yield and over $250 million in annual profits to build out the Hyperliquid DeFi ecosystem.
Ethena Labs formally submitted its proposal last, offering full backing for USDH with its USDtb (supported by BlackRock’s BUIDL), covering all costs associated with migrating USDC to USDH, and allocating the vast majority of proceeds to the Hyperliquid community.
The core reason for USDH’s popularity lies in its design, which effectively addresses the issue of stablecoin yield distribution. By reinjecting issuance revenue, transaction fees, and other benefits back into the ecosystem and enhancing value capture through HYPE buyback mechanisms, USDH offers users indirect returns in a compliant manner—a stark contrast to USDC, which cannot directly distribute dividends.
Despite its structural advantages, USDH still faces multiple challenges in truly competing with USDC, including liquidity building, user habits, and regulatory adaptation. Circle has already announced it will launch native USDC on Hyperliquid, directly confronting USDH and highlighting its deep liquidity and cross-chain capabilities. Analysts note that while USDH may not immediately threaten USDC’s dominance, its "yield + buyback" model could redefine how stablecoins integrate with protocol economies.
The birth of USDH is not only a critical step in Hyperliquid’s ecosystem development but also provides the industry with a pioneering case study for exploring stablecoin yield mechanisms within a compliant framework. Whether it can reshape the market landscape will depend on its real-world performance post-launch and ecosystem adoption.
