DeFi's Power Shift: Hyperliquid Auctioons $200M From Circle

Hyperliquid, the dominant decentralized exchange in the DeFi perpetual futures space, has initiated a competitive process to mint USDH, its proposed dollar-pegged stablecoin, with the aim of reducing its reliance on USDC and potentially capturing revenue from its vast reserves. The platform, which recently reported $398 billion in perpetual derivatives trading volume and $20 billion in spot trades, currently uses USDC for 95% of its stablecoin assets, representing a significant portion of USDC’s total supply. This arrangement has positioned Hyperliquid as one of the largest institutional users of USDC, contributing to Circle’s revenue, which heavily depends on interest earned from USDC reserves [1].

The USDH initiative represents a shift in governance and capital allocation within DeFi. Hyperliquid is auctioning the right to issue USDH through an on-chain governance process, where validator nodes will vote on proposals from competing issuers. Bidders must disclose their yield-sharing plans, compliance strategies, and infrastructure contributions. This transparent selection mechanism mirrors procurement practices in traditional finance and underscores Hyperliquid’s intent to align stablecoin incentives with the interests of its community [2].

Three major contenders have emerged: Paxos, Frax Finance, and Agora. Paxos, a well-established compliance-focused stablecoin issuer, proposes a 95% yield share for HYPE token buybacks, leveraging its existing relationships with platforms like PayPal and Venmo. Frax, a DeFi-native entity, offers a model where USDH is backed 1:1 by its frxUSD stablecoin and managed by institutional asset managers. Agora, backed by significant institutional capital, promises 100% of net revenue to HYPE buybacks and partnerships with firms like MoonPay and LayerZero [3].

The implications for Circle are significant. If USDH gains traction, Circle could lose up to $150–200 million annually in revenue, a 10% hit to its business. The platform has attempted to respond by accelerating its own integration of USDC and the Cross-Chain Transfer Protocol (CCTP) on Hyperliquid, but delays have allowed USDH to capture attention. The outcome of the USDH auction could signal a broader shift in DeFi governance, where protocols gain more control over capital allocation and yield distribution [1].

The broader DeFi community is closely watching the process. Hyperliquid’s approach could set a precedent for decentralized platforms to negotiate with centralized issuers in a transparent and competitive environment, potentially reshaping the stablecoin landscape. The final decision, to be made by Hyperliquid’s validators on September 14, will determine the path forward for USDH and the future of capital control in DeFi [3].

Source:

[1] Forbes (https://www.forbes.com/sites/tomerniv/2025/09/08/circles-revenue-at-risk-as-hyperliquid-opens-auction-for-usdh/)

[2] CoinDesk (https://www.coindesk.com/tech/2025/09/05/hyperliquid-moves-forward-to-launch-proprietary-stablecoin)

[3] Yahoo Finance (https://finance.yahoo.com/news/meet-bidders-vying-build-hyperliquid-152805117.html)