Community Power Shifts as USDH Takes Center Stage in DeFi Governance

Hyperliquid’s USDH stablecoin initiative, designed to decentralize stablecoin issuance and redirect yield within its ecosystem, has reached a key milestone with Native Markets securing the USDH ticker through a decisive governance vote. The decision, announced on September 14, 2025, came after a competitive bidding process involving major players such as Paxos, Ethena, and Frax. Native Markets, a team with deep ties to the Hyperliquid ecosystem, won the vote with a two-thirds supermajority of staked HYPE tokens, signaling strong community alignment with its vision. The team plans to launch a test phase of the stablecoin “within days,” marking a pivotal shift in how liquidity and governance power operate on the platform.

USDH is intended to reduce dependency on USDC, which currently accounts for approximately $5.6 billion in stablecoin liquidity on Hyperliquid. Analysts estimate that even a modest 15% market share for USDH could generate $220 million annually in additional capital for HYPE token holders, which could be reinvested into HYPE buybacks, staking rewards, and ecosystem incentives. Native Markets’ proposal outlines a reserve structure that includes full backing by US Treasuries and cash, with on-chain reserves managed through Bridge infrastructure and off-chain reserves initially held by BlackRock. Revenue from the stablecoin will be split evenly between HYPE buybacks and programs to expand USDH adoption.

The USDH vote marked Hyperliquid’s first major on-chain governance event outside of standard listing procedures, reflecting the project’s broader commitment to decentralization. Native Markets submitted its initial proposal within 90 minutes of the governance call and made revisions based on community feedback. The Hyperliquid Foundation abstained from the vote, ensuring a transparent and community-driven outcome. This governance model sets a precedent for decentralized decision-making in stablecoin issuance, a departure from traditional centralized models.

Ethena, one of the other contenders in the USDH bidding process, recently withdrew its proposal amid community backlash. Founder Guy Young acknowledged the pushback and shifted the team’s focus to product innovation, including the development of hUSDe synthetic dollars and USDe-powered savings tools. This move underscores the importance of community sentiment in shaping DeFi governance outcomes. Despite Ethena’s exit, the USDH competition has spurred broader interest in Hyperliquid’s governance model, with Arthur Hayes, co-founder of Maelstrom, increasing his stake in Ethena’s token, ENA, ahead of key voting events.

The launch of USDH is expected to create a new revenue loop within the Hyperliquid ecosystem, where yield generated from the stablecoin is reinvested into the platform. This model contrasts with the current setup, where a significant portion of yield is directed to external stablecoin issuers. By keeping yield internal, Hyperliquid aims to enhance liquidity depth, reduce dependency on external entities, and provide more direct benefits to HYPE token holders. The initial test phase will allow users to mint and redeem USDH in capped amounts before expanding to full-scale trading pairs.

With USDH set to compete directly with USDC, the stablecoin’s success will depend on adoption rates and liquidity depth. Hyperliquid has already announced complementary upgrades, including reduced trading fees, increased maker rebates, and permissionless listings, to enhance the platform’s appeal. The integration of USDH into the ecosystem is expected to drive further liquidity and reinforce Hyperliquid’s position as a leading decentralized trading platform.