Frax Bets All Treasury Yield for Decentralized USDH Edge

Frax Finance is positioning itself as a key contender in the competition to launch Hyperliquid’s USDH stablecoin, emphasizing its commitment to community alignment and a user-focused model. The decentralized exchange, which dominates the DeFi derivatives market with an approximate 80% market share, has announced a validator vote on Sept. 14 to determine the stablecoin’s issuer. Frax’s proposal highlights a model in which 100% of Treasury yield is passed to users with zero take, contrasting with other approaches that emphasize regulatory compliance or revenue-sharing commitments [1].

The USDH stablecoin is intended to replace the $5.5 billion of USDC currently in use on the platform, which accounts for 95% of the stablecoin supply. Its introduction is expected to generate substantial revenue through yields on U.S. Treasuries, making it a lucrative opportunity for the winning issuer. Frax’s approach is part of a broader contest involving major stablecoin providers, including Paxos and a coalition led by Agora and MoonPay. Each proposal presents a distinct vision for USDH’s operation, from Paxos’ regulatory-first strategy to Agora’s Hyper-native coalition backed by institutional custodians and consumer-facing payment rails [1].

A key concern in the debate is the potential influence of Stripe’s Bridge platform, which has raised alarms among some members of the Hyperliquid community. Critics argue that ceding control of the exchange’s monetary layer to Stripe could compromise economic sovereignty, particularly given Stripe’s ongoing development of its own blockchain, Tempo, and its control over wallet infrastructure via Privy. Nick van Eck, CEO and co-founder of Agora, warned that such a move would undermine the decentralized ethos of the platform [1].

Frax’s model is designed to appeal to those prioritizing decentralization and direct user benefits. By offering a 1:1 back with frxUSD and zero fees, Frax aims to ensure that the stablecoin remains aligned with the Hyperliquid community. The proposal also emphasizes the importance of a neutral and open monetary system within the ecosystem, which resonates with the broader DeFi movement that values transparency and equitable distribution of value [2].

The final decision will be made through a validator vote on Sept. 14, with proposals due by Sept. 10. The Hyperliquid Foundation has indicated it will effectively abstain from the vote, leaving the decision to the validators. This approach ensures a decentralized and stake-weighted decision-making process, aligning with the platform’s commitment to community governance [4].

As the competition unfolds, the outcome will have significant implications for the future of USDH and its role in the broader DeFi landscape. The winning issuer will not only gain the right to issue the stablecoin but also shape its economic model and governance structure, influencing how users interact with the platform and the broader decentralized finance ecosystem [3].

Source: [1] Community Pushback Emerges Against Stripe-Linked USDH Proposal (https://www.coindesk.com/markets/2025/09/08/community-pushback-emerges-against-stripe-linked-usdh-proposal) [2] Frax, Agora, and others also bid for Hyperliquid's USDH (https://www.panewslab.com/en/articles/45293894-7fb1-477a-a582-669154149316) [3] Hyperliquid Faces Community Pushback Against Stripe-Linked USDH Proposal (https://finance.yahoo.com/news/hyperliquid-faces-community-pushback-against-072924174.html) [4] Hyperliquid validators to vote on USDH stablecoin ticker (https://crypto.news/hyperliquid-validators-to-vote-on-usdh-stablecoin-ticker/)