Hyperliquid is preparing to launch USDH, a native dollar stablecoin that could transform its ecosystem and test the strength of onchain governance.
The outcome of this process will decide who controls billions in liquidity, shapes revenue flows, and defines the exchange’s long-term independence from external stablecoins such as USDC.
More than a simple ticker, USDH represents an economic lever with far-reaching consequences. Validators will decide which issuer secures the mandate, and their decision will reflect how Hyperliquid balances institutional credibility with decentralised innovation.
What Does Hyperliquid Aim to Achieve with USDH?
At the heart of Hyperliquid’s plan is the desire to capture value within its own ecosystem rather than outsource it to external issuers.
Currently, USDC serves as the backbone for many of its markets, tying the platform to external decisions and limiting its ability to recycle revenues internally.
By introducing USDH, Hyperliquid aims to build a stablecoin aligned directly with its Layer 1, governed transparently through validators, and designed to share reserve yields with the community.
Estimates suggest that if USDH secures around 15% of stablecoin liquidity, Hyperliquid could recycle as much as $5.5 billion in capital and generate about $220 million annually for holders of its native token.
This would provide not only a settlement asset but also a sustainable revenue engine. In this sense, USDH is not just about convenience for traders; it is about creating a durable financial base for the network.
The governance process is central to this vision. Validators will vote on which issuer gains the right to deploy USDH. The foundation has pledged to abstain, aligning its votes with the majority of non-foundation validators to ensure legitimacy.
By doing so, Hyperliquid is sending a signal that governance and transparency are not side considerations but core principles.
This choice also highlights a broader question: should Hyperliquid lean towards institutional-grade partners with regulatory credibility, or should it stay closer to decentralised, crypto-native models?
The competing proposals reflect both sides of that divide, and the validator vote will determine which path prevails.
Who Are the Contenders Fighting for the USDH Mandate?
The contest to issue USDH has drawn a wide range of teams, from traditional finance-linked institutions to decentralised protocols with community-first models. Six major contenders have already entered, with several more showing interest.
Ethena has become one of the most closely watched entrants. Already the third-largest stablecoin issuer globally, it has proposed issuing USDH through its USDtb token, backed by BlackRock’s BUIDL fund and distributed via Anchorage Digital Bank.
Ethena pledged to return 95% of reserve revenues to Hyperliquid, cover migration costs from USDC, and commit at least $75 million in incentives, potentially rising to $150 million. To address governance concerns, it suggested a validator “guardian network” to share oversight of USDH.
Ethena also promised partnerships with Securitize and the launch of a synthetic stablecoin, hUSDe, to deepen liquidity across Hyperliquid’s infrastructure.
Paxos is emphasising its regulatory track record and enterprise infrastructure. Its plan includes directing 95% of reserve yields into buybacks of the HYPE token, appealing to validators focused on predictable returns and compliance.
With its reputation as a trusted stablecoin issuer in traditional markets, Paxos positions itself as the most conservative and institutionally secure choice.
Frax Finance offers a more decentralised model, proposing zero take rates with all treasury bill yields flowing directly to Hyperliquid.
This aligns with DeFi-native principles, though it raises questions about whether such a structure can match institutional players in scale and regulatory resilience.
Sky, formerly MakerDAO, has proposed a multicollateral model with the ability to redeem instantly from a pool of 2.2 billion USDC. It offers a yield of 4.85% returned to Hyperliquid through HYPE buybacks, blending stability with a proven decentralised framework.
Agora, backed by VanEck and MoonPay, has made one of the most aggressive commitments by pledging to return 100% of reserve revenues to the community.
By positioning itself as the most user-aligned option, Agora is appealing directly to those who prioritise Hyperliquid’s growth over issuer profits.
Native Markets, founded by a long-time Hyperliquid supporter, has put forward a plan to issue USDH through Stripe’s Bridge processor.
While this shows a bridge between crypto and fintech, it has met resistance from some community members who argue that delegating issuance to a payment processor undermines Hyperliquid’s independence.
Beyond these, Curve and Bastion have submitted variations, ranging from decentralised collateralised debt systems to regulated hybrids. The diversity of these proposals underscores how high the stakes are.
With as much as $220 million in annual revenue and a crucial role in Hyperliquid’s infrastructure on offer, each issuer is making significant promises around governance, liquidity migration, and revenue-sharing.
The competition has also spilt into prediction markets, with traders betting on likely winners. Early odds favoured Native Markets, though Paxos and Ethena are now emerging as frontrunners.
Observers note that the decision could become a litmus test for whether DeFi-native teams or institutional players dominate the next generation of stablecoin infrastructure.
The validators’ choice is not simply about immediate returns. It will reveal how much weight they place on compliance, decentralisation, and alignment with Hyperliquid’s values.
It will also decide whether the platform leans more towards integration with traditional finance or remains firmly rooted in its DeFi origins.
Conclusion
The launch of USDH is shaping up to be one of the most significant governance moments in decentralised finance.
It combines the technical challenge of building a stablecoin with the political challenge of deciding who should control it. On one side are issuers like Paxos and Ethena, offering credibility, regulatory oversight, and institutional partnerships.
On the other side are teams like Frax, Sky, and Agora, prioritising decentralisation, community alignment, and transparent revenue sharing.
Whichever team secures the mandate, the decision will define Hyperliquid’s trajectory. A validator vote will decide whether USDH becomes a bridge to traditional finance or a flagship of DeFi-native experimentation.