Stablecoin Giants Vie for USDH Ticker — Hyperliquid Wins No Matter What

Background

On Sept. 5, Hyperliquid, the top decentralized exchange for onchain perpetual futures, announced a governance vote to award the long-reserved USDH ticker to a "Hyperliquid-first, Hyperliquid-aligned, and compliant USD stablecoin." This is a break from tradition. Ticker rights on Hyperliquid are usually sold every 31 hours in Dutch auctions, with winning bids burning HYPE, the network's native token. At their peak, those auctions reached as high as $1 million worth of HYPE, settling today closer to $20,000 to $40,000.

USDH, however, is different. With $5.5 billion of USDC balances already powering Hyperliquid and more than $200M in annual yield flowing externally to that stablecoin's issuer, Circle, the USDH ticker represents a chance to recapture that value for the Hyperliquid network. The winner of the vote won't automatically replace USDC as the dominant quote currency, but it will gain one of the most coveted forms of digital real estate on the network: the USDH ticker.

The announcement has sparked intense competition among stablecoin issuers, with proposals submitted by established players such as Ethena, Sky (formerly MakerDAO), Paxos, Agora, Frax Finance, Bastion, and OpenEden as well as new entrants like Native Markets. The process itself is also precedent-setting. It is Hyperliquid's first governance vote outside of de-listings and a test of whether the network can shepherd decision-making in a decentralized manner.

The following provides an overview of the ongoing governance process, leading proposals submitted, and longer-term implications of the vote.

Voting Process and Timeline

This marks Hyperliquid's first major governance vote outside of asset de-listings and will be conducted fully onchain with validator voting power proportional to stake weight. Proposals for USDH were due Sept. 10 at 10:00 UTC (6 a.m. Eastern), with validators given 24 hours to declare their voting intentions. Following this, users with staked HYPE may redelegate their stake to validators aligned with their preferences. The final vote will take place on Sept. 14 from 10:00 to 11:00 UTC.

For a proposal to pass, it must reach quorum with support from at least two-thirds of total stake. Currently, validators tied to the Hyperliquid Foundation, the steward of the ecosystem, hold roughly 54% of the total stake. As a result, foundation validators will abstain until quorum is reached independently, after which they will vote in accordance with the expressed interests of the community. Kinetiq, the ecosystem's leading liquid-staking provider, has also announced it will abstain, redelegating its stake to foundation validators. As a result, an estimated ~63% of total HYPE stake will not participate directly, leaving the decision in the hands of independent validators.

For a vote of such importance, this is an incredibly tight timeline. Multiple teams have expressed concerns that there won't be enough time for the contenders to put forward fully fleshed out proposals or for the voters to digest all their options. Despite these objections, the Hyperliquid team has not extended the timeline.

Hyperliquid Stablecoin Landscape

To date, Hyperliquid's stablecoin landscape has been dominated by Circle's USDC, which functions as the primary margin, collateral, and settlement currency across the network. Roughly $5.5 billion in USDC, 95% of all stablecoins on Hyperliquid, is issued by Circle. Unlike other chains where Circle mints directly, USDC on Hyperliquid is not issued natively. Instead, it sits in a pooled contract on Arbitrum, a layer-2 network of Ethereum. When users deposit USDC, their funds are added to this pool, and Hyperliquid's backend accounting assigns each participant a balance corresponding to their share of the pooled USDC. Although Circle announced plans in July to launch native USDC issuance on Hyperliquid through an upgraded Cross-Chain Transfer Protocol (CCTP V2), this has yet to happen. The current reliance on bridged USDC raises security concerns because any exploit affecting Arbitrum-held collateral could directly jeopardize Hyperliquid's trading infrastructure.

Additionally, even though 8% of total USDC issuance lives on Hyperliquid, the network captures no tangible value from this arrangement. Adding insult to injury, half the yield generated on USDC is directed to Coinbase under its revenue-sharing arrangement with Circle, sending value to what is arguably a Hyperliquid competitor. For $5.5 billion in USDC, roughly $220 million in annual yield is flowing externally to Circle and Coinbase. As a natively issued stablecoin, USDH would not only improve security and reduce dependency risks but also redirect yield generated on stablecoin balances back to Hyperliquid.

While Circle has indicated it will not submit a proposal for the USDH ticker,it is not backing down. Just days following the announcement, Circle CEO Jeremy Allaire tweeted, "Don't Believe the Hype…We are coming to the HYPE ecosystem in a big way. We intend to be a major player and contributor to the ecosystem."

What Rights Does USDH Confer?

It is important to clarify what is and what is not at stake in the USDH governance vote. Winning the vote does not hand a team control over Hyperliquid's stablecoin rails or an automatic monopoly on trading. Tangibly, the outcome is limited to one result: the to issue a stablecoin under the USDH ticker.

Symbolically, however, the winner will also gain legitimacy as the stablecoin issuer most closely aligned with Hyperliquid's values and governance. That endorsement will matter for integrations, market-maker support, and long-term adoption.

Equally important is what the USDH ticker does not guarantee. It does not mean that all USDC quote pairs on perps or spot will suddenly migrate to USDH. Hyperliquid's exchange infrastructure is deeply rooted in USDC, and forcibly shifting liquidity would risk damaging depth and user experience.

Nor would the ticker prevent competitors from launching. In fact, many proposers have already signaled they intend to deploy on Hyperliquid regardless of the vote.

In practice, the USDH winner will secure a powerful brand and likely the default role in new spot markets launched under HIP-3 (the upgrade that lets anyone, not just the Hyperliquid team, launch markets leveraging Hyperliquid's infrastructure). Still, whoever issues USDH will have to earn adoption through liquidity, integrations, and execution.

The ticker is best understood as a signal of alignment rather than a guarantee of dominance. Its true value will be determined by how effectively the issuer delivers on market adoption.

Meet the Contenders

Here's an overview of the major proposals. Readers are also encouraged to review the proposals in full (linked in each description). They are compared side-by-side in the appendix.

Native Markets

Native Markets is a new entrant to stablecoin issuance but deeply embedded in the Hyperliquid ecosystem. Its founder, Max Fiege, was an early Hyperliquid advocate and advisor to several major apps on HyperEVM (the network's smart contract layer) and Hyperion, the publicly traded treasury company that buys HYPE. While Native Markets has no track record of issuing stablecoins, it distinguishes itself as the only team to have already deployed and tested token flows on Hyperliquid's testnet and mainnet.

Native Markets was the first team to submit a proposal, less than 90 minutes after the USDH announcement was posted by the Hyperliquid account on X (formerly Twitter). Following feedback from the community that aspects of Native Markets' initial proposal was too vague, on Sunday the team submitted an expanded proposal. Major components of their proposal include:

• Stablecoin Issuance and Infrastructure: USDH natively issued on HyperEVM with composability on Hypercore, the network's lightning-fast central limit order book. Infrastructure has already been deployed and tested on Hyperliquid testnet and mainnet; currently undergoing audits.

• Reserve Backing and Custody: Backed by cash and U.S. Treasuries. Offchain reserves managed by BlackRock, the world's largest asset manager, with onchain reserves managed by Superstate via a service provider called Bridge.

• Yield Allocation and Incentives: 50% of reserve yield directed to the Hyperliquid Assistance Fund; 50% dedicated to USDH growth, including partnerships with builder-code interfaces, HIP-3 markets, and HyperEVM apps.

• Regulatory Compliance and Fiat Gateways: Regulatory compliance via Bridge. Bridge is registered as a money services business (MSB) with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) and holds multiple state money transmitter licenses but not a charter to fully comply with the recently passed GENIUS Act. The team is pursuing further licenses to ensure future GENIUS compliance.

• Ecosystem Integration and Partnerships: Native Markets has deep Hyperliquid-native ties. As mentioned, its founder, Max Fiege, was an early Hyperliquid adopter and advocate. He serves as an advisor to several of the largest HyperEVM apps and is an advisor to the HYPE digital asset treasury company Hyperion.

Paxos

Paxos is one of the most established players in the stablecoin market, with over $160 billion issued across products like BUSD (white-labeled for Binance) and PYUSD (for PayPal). Known for regulatory rigor and institutional partnerships, Paxos brings a track record of scaling stablecoins with some of the world's largest fintech companies. Paxos submitted its initial proposal on Sept. 6, a little over 24 hours after Hyperliquid announced the USDH vote. On Sept. 9, the team introduced a revised proposal in response to community feedback. Major components of the proposal include:

• Stablecoin Issuance and Infrastructure: USDH natively issued on HyperEVM with Hypercore composability. Infrastructure leverages Paxos's proven tech (e.g. PYUSD, BUSD, USDP). Multichain interoperability supported.

• Reserve Backing and Custody: Reserves held in bankruptcy-remote accounts, backed by cash, U.S. Treasuries, and reverse repos. Custody, regular audits, and monthly attestations in line with Paxos' regulatorily compliant standards.

• Yield Allocation and Incentives: Paxos initially proposed 95% of reserve yield allocated to HYPE buybacks for redistribution to protocols, validators, and users, with 5% retained by Paxos to fund operations and reinvest in USDH growth. In the revised proposal, Paxos introduced a new tiered allocation structure based on USDH total value locked, or TVL (see chart below). The team also added $20 million in incentives committed by its partner Paypal to the HYPE ecosystem.

• Regulatory Compliance and Fiat Gateways: Full compliance with GENIUS Act (U.S.), MiCA regulations (EU), and other global standards through Paxos. Fiat on/off-ramps through the global interbank messaging system SWIFT and custodian partnerships as well as Venmo, Checkout, and other offramps.

• Ecosystem Integration and Partnerships: Potential integrations with major exchanges and wallets including Binance, PayPal, Kraken, Robinhood, OKX, Anchorage. Strengthened Hyperliquid ties through recent acquisition of Molecular Labs, creators of the first HYPE liquid staking token and tokenized HLP product. In the revised proposal, Paxos said it would get HYPE listed on Paypal and Venmo and open the door for integrations with Paypal's 400 million users and 35 million merchants. Paxos also plans to build an earn product that "can be embedded into any consumer frontend using a simple API suite" and a suite of tokenized HLP products to drive HIP-3 growth.

Ethena

Ethena Labs is the creator of USDe, now the third-largest stablecoin globally with over $13 billion in supply. Deployed across Ethereum, Arbitrum, Binance's BNB Chain, Optimism, Mantle, Kava, and Linea, Ethena has proven its ability to bootstrap adoption at scale and integrate across both centralized and decentralized venues.

Ethena submitted its proposal for USDH on Sept. 9, the last major issuer to do so. Major components of the proposal include:

• Stablecoin Issuance and Infrastructure: USDH natively issued on HyperEVM with Hypercore composability.

• Reserve Backing and Custody: Initially backed by Ethena's USDtb (itself 90% backed by BlackRock's a tokenized money market fund BUIDL, whose collateral is custodied at BNY Mellon). Optional future governance-approved expansion to another existing Ethena stablecoin, USDe, or to a Hyperliquid-native version, hUSDe.

• Yield Allocation and Incentives: Initially at least 95% of reserve yield directed to Hyperliquid ecosystem (Assistance Fund + HYPE buybacks). Potential to adjust to 90% if KPIs (e.g. $5 billion supply, peg stability) are met. Additional possible incentives with Ethena points rewards, up to $150 million in ecosystem grants for HIP-3 frontends, and liquidity loans and migration cost coverage for USDH adoption.

• Regulatory Compliance and Fiat Gateways: Compliance via Anchorage Digital Bank, a federally chartered crypto bank. Enables GENIUS alignment and global fiat on/off-ramps.

• Ecosystem Integration and Partnerships: Potential integrations across the Hyperliquid ecosystem include: the launch of hUSDe (a synthetic dollar backed by uBTC and uETH, the network's tokenized versions of bitcoin and ether, and hedged via HyperCore); the introduction of HIP-3 rewards to lower perp trading costs with USDe margins; direct USDe hedging on Hyperliquid; and expanded prime brokerage and portfolio margin support. Additional initiatives extend to equity perpetuals with Ethena-provided liquidity through a collaboration with Unit (Hyperliquid's tokenization layer), as well as broad HyperEVM integrations such as LayerZero for interoperability, new earn features via Hyperlend, Felix, and Hyperbeat, and Pendle yield products enhanced with points-based incentives.

Agora

Agora positions itself as an institutional-grade white-label stablecoin infrastructure provider, backed by TradFi giants VanEck and State Street. The team's model is built around compliance, scale, and partnerships that link directly into the global banking system. Agora's flagship stablecoin, AUSD, has $166 million issued and is accessible on 10+ blockchains. Agora submitted its proposal on Sept. 7. Major components of the proposal include:

• Stablecoin Issuance and Infrastructure: USDH natively issued on HyperEVM with HyperCore composability, while also supporting cross-chain interoperability through LayerZero. Agora's white-label stablecoin engine will provide a fully collateralized, Hyperliquid-native product.

• Reserve Backing and Custody: Reserves consist of short-dated U.S. Treasuries, overnight reverse repos, and cash. These will be managed by VanEck (over $130 billion in assets under management) and custodied by State Street (over $49 trillion in assets under custody/administration) with Chaos Labs providing onchain proof of reserves.

• Yield Allocation and Incentives: Agora commits 100% of net reserve yield to the Hyperliquid ecosystem, split between the Assistance Fund and HYPE buybacks via quarterly governance votes. In addition, Agora commits to $10 million in day-one liquidity seeding.

• Regulatory Compliance and Fiat Gateways: Agora and its infrastructure are designed to comply with the GENIUS Act and global regulations. Fiat on/off-ramps would be enabled through partnerships with Cross River Bank and Customers Bank.

• Ecosystem Integration and Partnerships: Partnerships for distribution via Rain (which processes card payments for 2B+ users), Moonpay (tens of millions of KYC'd users), and EtherFi vaults. LayerZero interoperability enables liquidity onboarding from dozens of chains.

Sky

Sky is the successor to MakerDAO, one of DeFi's oldest and most influential protocols, responsible for pioneering decentralized stablecoins through DAI. Today, Sky governs over $8 billion in circulating stablecoins (including DAI and the newer USDS) backed by $13 billion in collateral.

Sky submitted its initial proposal on Sept. 8 and followed up with additional details the next day. Major components of the proposal include:

• Stablecoin Issuance and Infrastructure: Issued through the Sky Protocol on Ethereum and bridged to Hyperliquid (technically identical to DAI/USDS). Natively multichain via LayerZero. Integrated with Sky's Peg Stability Module (PSM) for $2.2 billion in instant USDC redemption liquidity and convertible to and from a yield-bearing token called sUSDS to earn the Sky Savings Rate (currently 4.75%).

• Reserve Backing and Custody: Backed by Sky's diversified $13 billion portfolio, including crypto collateral, U.S. Treasuries, and collateralized loan obligations (CLOs). Transparency is provided through real-time dashboards at info.sky.money.

• Yield Allocation and Incentives: 4.85% yield on all USDH with all proceeds directed to HYPE buybacks for the Assistance Fund. Sky also commits $25 million to seed a Hyperliquid Genesis "Star," modeled after Sky's application module Spark, to bootstrap DeFi growth.

• Regulatory Compliance and Fiat Gateways: Not GENIUS-compliant at inception, but Sky's modular design could open the door for USDH to be customized for GENIUS compliance over time. Only stablecoin protocol with an official Standard & Poor's credit rating (B-) and Basel III-style frameworks for collateral risk management.

• Ecosystem Integration and Partnerships: Implementation led by the Sky Frontier Foundation (top leadership and developers from Sky). Deployment of Sky's $8 billion+ balance sheet directly into Hyperliquid and migration of Sky's $35 million+ annual buyback system from Uniswap to Hyperliquid. Future spin-off of USDH into an independent "Generator Agent" for full autonomy, with its own governance, tokens farmed on Hyperliquid, and customizable strategies (e.g., higher risk for competitive yields or regulatory focus).

Frax

Frax Finance is best known for innovating in hybrid stablecoin design and operating at multi-billion scale across products including FRAX, FraxLend, and sfrxETH. Its flagship stablecoin, FRXUSD, has a market cap of $101 million.

Frax submitted its initial proposal on Sept. 5 and submitted modifications on Sept. 8. Major components include:Major components of their proposal include:

• Stablecoin Issuance and Infrastructure: Frax initially proposed non-native USDH issuance but has since updated the proposal to feature Hyperliquid-native issuance in partnership with a federally regulated U.S. bank issuer (name undisclosed pending signed agreements and legal review). The design uses FraxNet as the account layer, enabling instant multichain connectivity across 20+ chains, with LayerZero powering interoperability.

• Reserve Backing and Custody: Backed 1:1 by U.S. Treasuries through tokenized funds managed by BlackRock, Superstate, and WisdomTree, with Fidelity onboarding soon. Lead Bank, a fintech-focused institution, and other tier-1 financial partners would provide banking rails.

• Yield Allocation and Incentives: 100% of underlying Treasury yield streamed programmatically onchain to Hyperliquid with 0% Frax take rate. Hyperliquid governance would choose how revenue is used, such as boosting HYPE staking yield, targeted HYPE buybacks for the Assistance Fund, or rebates to active traders/USDH holders.

• Regulatory Compliance and Fiat Gateways: Issued by the undisclosed federally regulated U.S. bank for GENIUS-aligned issuance at scale. 1:1 mint/redeem across USDC, USDT, and fiat is powered by FraxNet, the team's cross-chain interoperability infrastructure, providing institutional-grade accessibility.

• Ecosystem Integration and Partnerships: Frax does not include any major partnerships or integration plans in its proposal but has said in subsequent Q&A sessions that it would have a USDH growth lead to focus on scaling/distribution.

Curve

Curve is best known for launching one of the first decentralized exchanges optimized for stablecoin trading through its stableswap AMM design, and for pioneering the voter-escrow (veCRV) token governance model that has since been widely adopted across DeFi. In 2023, Curve launched crvUSD, a decentralized stablecoin which has an outstanding issuance of $231 million. Its proposal is unique in that it proposes reserving a second ticker, dUSDH, for a decentralized stablecoin built on crvUSD's collateralized debt position (CDP) model.

Curve submitted its proposal on Sept. 9. Major components include:

• Stablecoin Issuance and Infrastructure: The system would be powered by Curve's LLAMMA architecture, which uses continuous rebalancing instead of binary liquidations, improving resilience during volatility. Governance of dUSDH would rest with Hyperliquid, while Curve provides the technical stack and operational support.

• Reserve Backing and Custody: dUSDH would be backed by Hyperliquid-native assets such as HYPE and HLPs, creating a direct link between stablecoin issuance and ecosystem growth. The peg would be maintained through automated rate adjustments and Curve's "pegkeeper" system, with Hyperliquid assets used to stabilize the dollar value.

• Yield Allocation and Incentives: Stability fees generated by the CDP system would flow back to Hyperliquid governance to decide how best to allocate them. A staking module could also offer dUSDH holders steady APRs while enabling looping and leverage strategies for minters.

• Regulatory Compliance and Fiat Gateways: Unlike other proposals, Curve's dUSDH would be fully decentralized and censorship-resistant. However, it would not provide fiat redemption rails or compliance alignment, which is why Curve frames it as complementary to a regulated USDH.

• Ecosystem Integration and Partnerships: By enabling minting against HYPE and HLPs, dUSDH would create a flywheel effect: users borrow, trade, and loop within Hyperliquid, increasing native token utility. This complements the regulated USDH path and positions Hyperliquid with a dual-stablecoin strategy: one for institutional adoption, another for DeFi-native leverage and growth.

OpenEden

OpenEden is an issuer of institutional-grade, tokenized real-world assets and the largest onchain U.S. Treasury bill provider in Asia. Founded in 2022, the firm has launched products such as USDO, a stablecoin issued under a Bermuda regulatory license, and TBILL, a tokenized money market fund with one of the longest track records in the sector.

OpenEden submitted its proposal on Sept. 9. Major components of their proposal include:

• Stablecoin Issuance and Infrastructure: USDH would be issued through OpenEden Digital, a wholly owned subsidiary licensed by the Bermuda Monetary Authority (BMA) with a Class M Digital Asset Business License. Issuance occurs via a bankruptcy-remote segregated accounts company (SAC) structure, ensuring that USDH reserves are legally segregated from issuer liabilities. Reserves would be backed by TBILL, creating a transparent and independently rated foundation.

• Reserve Backing and Custody: USDH would be backed by TBILL, a tokenized money market fund investing in short-duration U.S. Treasuries and independently rated (Moody's A, S&P AA+f/S1+). Custody and investment management is provided by BNY Mellon. Chainlink oracles would be used for data feeds, proof-of-reserve, and cross-chain interoperability (via Chainlink's Cross-Chain Interoperability Protocol, or CCIP).

• Yield Allocation and Incentives: 100% of minting and redemption fees would be directed to HYPE buybacks and redistributed to validators. 100% of underlying reserve yield (~4% from TBILL) would also flow to HYPE buybacks and ecosystem initiatives. In addition, 3% of the total EDEN token supply would be earmarked as incentives for USDH adoption on Hyperliquid.

• Regulatory Compliance and Fiat Gateways: OpenEden emphasizes its regulatory coverage through the BMA license and SAC structure. USDH would support direct fiat minting and redemption via U.S. banking partners, as well as conversion through USDC.

• Ecosystem Integration and Partnerships: In addition to BNY Mellon, OpenEden partners with Chainlink for data, proof-of-reserves, and cross-chain transfer support. These integrations aim to ensure USDH can be widely adopted across DeFi and institutional settlement systems.

BitGo

BitGo is one of the oldest and custodians in crypto, founded in 2013 and currently overseeing more than $90 billion in assets on platform. The firm operates six regulated trust entities globally and provides custody for major tokenized assets such as wrapped bitcoin (WBTC) and USD1, the stablecoin launched by the Trump family's World Liberty Financial. BitGo submitted its proposal on Sept. 10. Major components of the proposal include:

• Stablecoin Issuance and Infrastructure: USDH would be issued natively on Hyperliquid, deployed across HyperEVM and HyperCore, and redeemable 24/7 across fiat, USDC, and USDT via integrated banking rails. BitGo emphasizes that USDH would not be a wrapper but fully backed at parity with U.S. dollars. Interoperability with other blockchains would be enabled through Chainlink's CCIP.

• Reserve Backing and Custody: Each USDH token would be fully backed 1:1 by cash, money market funds, short-term U.S. Treasuries, and overnight repos. Custody and reserve management would run through BitGo's global trust companies, supplemented by financial institution partners in multiple jurisdictions. Transparency would be provided through third-party audits twice monthly, with onchain verification via Chainlink's Proof of Reserve service.

• Yield Allocation and Incentives: Reserve proceeds would be programmatically directed toward buying and staking HYPE, with staking capped at 20% per validator to avoid concentration risk. Rewards from staking would be distributed pro rata back to USDH holders, with a portion optionally allocated to the Assistance Fund as determined by Hyperliquid governance. BitGo would charge a 30-basis-point fee on reserve balances, citing the need to ensure sustainability even in low-rate environments.

• Regulatory Compliance and Fiat Gateways: BitGo brings a broad global regulatory footprint, including state-chartered trust companies in the U.S., MiCA-compliant custody in Germany, MAS-regulated operations in Singapore, and VARA licensing in Dubai. This footprint, combined with established banking relationships, enables direct fiat rails for minting and redeeming USDH worldwide.

• Ecosystem Integration and Partnerships: BitGo intends to leverage its thousands of institutional clients, as well as relationships with exchanges, market makers, and fintech firms, to drive instant USDH liquidity and adoption. With deep staking infrastructure already in place, BitGo emphasizes its ability to integrate USDH rapidly into global institutional workflows.

Additional proposals not covered above

• Bastion

• Ultra Sound Dollar on Hyperliquid (only accessible through Discord)

• Team Konelia (only accessible through Discord)

Early Voting Indications

With the formal proposal window now closed, attention has shifted to validator declarations, with final positions due Thursday at 10:00 UTC. Excluding foundation validators, 19 validators are eligible to participate. As of Wednesday morning, nine had declared, representing 43% of eligible stake. These weights can still shift ahead of Sunday's final vote, as HYPE stakers may redelegate to validators aligned with their preferences.

Early voting preferences from highlight a few key trends:

• Hyperliquid Alignment Trumps All: Validator endorsements so far have overwhelmingly prioritized Hyperliquid-first alignment above all else. Native Markets has received broad validator backing on the strength of its exclusive focus on Hyperliquid, with no competing chains, tokens, or external priorities. Supporters frame this singular dedication as essential to safeguarding the network's sovereignty, contrasting Native Markets with larger issuers like Paxos or Ethena who may have conflicting interests tied to their other stablecoin products. Even validators that ultimately endorsed Paxos or Ethena acknowledge that alignment is critical and position their choices as serving ecosystem growth without undermining Hyperliquid's independence. The common view is that while compliance frameworks and technological stacks can be replicated, true Hyperliquid-first commitment cannot be commoditized. For many validators, this ecosystem loyalty outweighs the resources and scale offered by more experienced issuers.

• Regulatory Compliance and Experience: Those not voting for Native Markets stress the importance of battle-tested regulatory compliance and institutional track records. Paxos backers point to its New York trust charter, global licensing footprint, and history of issuing over $160 billion in stablecoins, making it uniquely capable of delivering USDH in line with the GENIUS Act and Europe's MiCA. Ethena supporters emphasize the firm's scale managing billions safely and its ability to deploy with Anchorage custody and BlackRock-backed reserves, offering infrastructure usually reserved for the largest stablecoins. These validators see compliance and operational resilience as non-negotiable for long-term viability, particularly to withstand crises and regulatory scrutiny. Concerns were also voiced over Native's reliance on third parties such as Stripe for issuance, raising questions about vendor dependency. The debate reflects a split between those who prioritize proven compliance and those willing to trust newer but ecosystem-aligned teams to catch up.

• Ecosystem Growth Through Yield Sharing and Incentives: A central motivation across validator statements is how USDH yield and incentives will fuel Hyperliquid's growth. Native Markets supporters stress its dual approach of directing reserve yield to both HYPE buybacks and reinvestment into ecosystem expansion, framing this as a sustainable flywheel. Ethena's proposal appealed to validators by committing at least 95% of yield, offering up to $150 million in ecosystem grants, covering migration costs, and providing liquidity loans to market makers. Paxos backers point to its $20 million incentive commitment tied to PayPal and its promise to eventually scale to global consumer and enterprise adoption. Across the board, validators see yield-sharing models, liquidity commitments, and integrations as critical levers to drive adoption, with differences emerging over whether to prioritize near-term incentives or long-term reinvestment.

• Rigorous Evaluation Processes and Community Involvement: A final trend across validator communications was the care taken to present decisions as the product of rigorous, transparent processes. Many referenced staker consultations, AMAs, and proposal reviews, often publicly sharing scoring frameworks or evaluation rubrics. Independence was stressed. Validators including Imperator explicitly denied any financial relationships with issuers to underscore their neutrality. Others, such as IMC and Infinite Field, emphasized community engagement as central to their deliberations, positioning themselves as stewards rather than gatekeepers. HypurrCollective, the largest validator by stake, which has yet to declare whom it will vote for, even released a comprehensive framework for making the decision based on staker preferences, Telegram and X polls, and its own team's position. The USDH decision is not just about choosing an issuer, but demonstrating Hyperliquid's evolving governance maturity.

Ultimately, the emerging picture is a divide between idealistic support for a Hyperliquid-native champion in Native Markets and pragmatic backing for compliance-heavy incumbents like Paxos and Ethena. Yet across all camps, a unifying note is optimism. Every validator closed its statement by urging collaboration, regardless of outcome.

Polymarket's prediction markets has also helped provide some clarity on the potential outcome of the vote, with Native Markets maintaining the lead since the market's launch, in line with the current voting distribution. As the vote proceeds, readers can track real-time validator voting updates here and Polymarket odds here.

Implications for Hyperliquid

Paying for Distribution

The competition for USDH underscores a shifting dynamic in stablecoin issuance where issuers must increasingly pay for distribution. Ethena illustrated this trend just days after the USDH process began, announcing its launch on MegaETH, an Ethereum L2, where yield from its stablecoin would be directed toward covering sequencer costs. Rather than capturing all the revenue themselves, issuers will increasingly need to divert income back into the ecosystems where they launch, essentially subsidizing adoption to gain traction. In this model, beyond brand recognition, the most important factor is how much value the issuer is willing to hand back. For now, Tether (the largest stablecoin issuer) is a major winner in this environment given its unparalleled reach and ability to hold distribution without needing to make such concessions.

Commitment and Execution Risk

A central question in the USDH race is what happens if the winning team fails to live up to its commitments. Building stablecoin infrastructure that is secure, compliant, liquid, and integrated is a nontrivial challenge and the compressed timeline for the vote has been a recurring criticism throughout the process. Proposals read well on paper, but teams were given less than a week to formulate them, leaving critical details unknown and amplifying execution risk. As a result, many of the submissions resemble letters of intent more than binding commitments. This raises the question of whether the governance process should have delayed the vote until teams could present more concrete, audited, and executable proposals. The rush risks prioritizing speed over thorough due diligence and raises questions over what happens if a team fails to deliver on their promises.

Regulatory Compliance

While most proposals have highlighted U.S. regulatory status and GENIUS Act alignment as a competitive advantage, it is worth questioning whether anchoring USDH to a U.S.-regulated issuer could actually create risks for Hyperliquid and its markets. The RFI called for a "compliant" stablecoin but did not specify which type of compliance, and validators may choose to weigh whether tying USDH to an OCC-chartered or state-chartered entity could inadvertently creates a U.S. nexus that Hyperliquid does not need. This could unnecessarily expose Hyperliquid markets if U.S. authorities were to take a hostile stance toward the protocol. That said, issuers could potentially structure issuance through offshore entities while still adopting the collateral quality and design of the GENIUS Act's framework. One possible question for validators, then, is whether U.S. regulatory ties represent stability and credibility, or an avoidable source of potential risk.

Deployment and First-Mover Advantage

Another uncertainty is whether the winning team will be the first to deploy. Several issuers, including Native Markets, Paxos, Agora, Sky, and Ethena indicated they may launch a Hyperliquid-native stablecoin regardless of the outcome, with Native Markets indicating it may be ready to deploy as early as next week. If so, the "winner" of the vote might not be the first to market. This complicates the calculus for validators and for the community: is the ticker's symbolic weight more important than the speed and quality of actual deployment?

USDH as a Governance Precedent

This is the first time Hyperliquid has run a governance process outside of delisting processes. What else might the community vote on next? Validators are being asked to weigh not just technical readiness but also value alignment, counterparty trust, and execution risk. Future votes on protocol revenue, upgrades, or cross-ecosystem partnerships could follow this playbook. USDH is as much a test of Hyperliquid's governance maturity as it is a stablecoin decision.

The 'Ethereum Alignment' Contrast

Ethereum has spent years talking about "alignment" but, in practice, almost none of the largest protocols or L2s send meaningful value back to ETH holders. Instead, they create value by expanding the reach of the EVM and enabling broader ecosystem growth for Ethereum. One of the most striking features of the USDH proposals is the degree of value alignment with Hyperliquid, with every major USDH contender pledging 95% to 100% of reserve yield toward accruing value to the Hyperliquid ecosystem. That's a significant inversion of Ethereum's norms and may become Hyperliquid's defining edge if the model proves sustainable. That said, this alignment carries a potential downside: it may undercut user demand to hold USDH. Without some form of holder incentive, users may prefer to keep capital in yield-bearing alternatives and convert into USDH only when needed for trading. This could limit USDH's circulating supply and slow adoption.

Conclusion: No Matter What, Hyperliquid Wins

However the USDH vote resolves, one conclusion is already clear: the real winner is Hyperliquid. The process has forced some of the largest players in stablecoins to not only compete for the USDH ticker, but also to publicly pledge unprecedented levels of alignment with the Hyperliquid ecosystem. Issuers are portraying themselves as indispensable partners, but in reality, they need Hyperliquid more than Hyperliquid needs them. What issuers want is distribution, Hyperliquid's liquidity, traders, and narrative momentum. In effect, USDH is forcing issuers to compete to distribute inside Hyperliquid, not the other way around. Whether through regulated fiat-backed models or decentralized designs, issuers are bending their economics, partnerships, and infrastructure to Hyperliquid's benefit. The vote will determine who carries the USDH ticker, but Hyperliquid has already secured what matters most: recognition as a network powerful enough to reshape the stablecoin value accrual landscape itself.

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