Six Major Firms Compete for Hyperliquid's USDH Stablecoin Issuance, $5.6 Billion in Reserves at Stake

A high-stakes competition is underway as leading blockchain firms vie for the right to issue Hyperliquid's forthcoming native stablecoin, USDH. This strategic move, culminating in a validator vote on September 14, aims to reduce the decentralized exchange's reliance on external stablecoins and redirect substantial revenue back to its ecosystem. The initiative highlights a growing trend in decentralized finance (DeFi) where protocols assert greater control over their financial infrastructure.

Hyperliquid has established itself as a dominant force in the DeFi derivatives market, controlling approximately 70% of the decentralized perpetual futures market. The platform records a monthly trading volume of nearly $400 billion in derivatives, demonstrating its significant liquidity and user engagement. Its decision to launch USDH is poised to reshape its financial architecture and enhance its on-chain capabilities.

The competitive bidding process has attracted major players, including Paxos, Frax Finance, Agora, Sky (formerly MakerDAO), Ethena, and Native Markets. Each contender has submitted detailed proposals outlining how they plan to manage USDH reserves, allocate interest earnings, and ensure regulatory compliance. Proposals range from pledging 95% of reserve income for HYPE token buybacks to offering high yields and substantial ecosystem development funds.

This transparent, on-chain voting process has been described by some as "governance theater," a term acknowledged by Rachael Horwitz, who stated in a recent tweet, "> I think the @HyperliquidX competition is indeed genius marketing and something to learn from. People use 'governance theater' in a pejorative way but once you recognize that governance does have a theatrical element to it, you can lean into that, create real stakes, and get everyone talking (yes even trash talking)." Horwitz emphasized that this approach fosters transparency and is a net positive for Hyperliquid's credibility.

The financial implications are significant, as Hyperliquid currently holds around $5.6 billion in stablecoin reserves, predominantly in USDC, with the yield benefiting its issuer, Circle. By launching USDH, Hyperliquid aims to capture this revenue internally, potentially amounting to hundreds of millions annually. This move is expected to align incentives more closely with the Hyperliquid community and further boost the value of its native HYPE token.