Hyperliquid's USDH Aims to Redirect $220M Annually, Challenging USDC's DeFi Dominance

Hyperliquid’s USDH stablecoin launched on September 23, 2025, following a competitive governance vote that selected Native Markets as its issuer. The stablecoin, pegged 1:1 to the U.S. dollar, began trading on Hyperliquid’s platform with an initial volume of $2.2 million. Native Markets secured the issuance rights after a contentious bidding process that saw six major players—including Paxos, Sky (formerly MakerDAO), Frax Finance, and Ethena Labs—compete for the opportunity. The vote, held on September 14, resulted in Native Markets winning over two-thirds of the validators’ approval, despite criticism that the process favored the startup over more established contenders.

The USDH stablecoin aims to reduce Hyperliquid’s reliance on external stablecoins like USDC, which currently account for 95% of its $5.6 billion in stablecoin deposits. By capturing the Treasury yield generated from these reserves, Hyperliquid seeks to redirect approximately $220 million annually back into its ecosystem. Native Markets’ proposal outlined a reserve structure backed by cash and U.S. Treasury equivalents, managed through Stripe’s Bridge infrastructure and BlackRock’s BUIDL tokenization fund. The issuer committed to allocating 50% of reserve yields to Hyperliquid’s Assistance Fund, with the remaining portion supporting USDH ecosystem development.

The launch of USDH marks a strategic shift in decentralized finance (DeFi), as platforms increasingly seek to internalize stablecoin revenue. Native Markets structured the rollout as a phased expansion, initially capping individual transactions at $800 while testing core functionalities. Future integrations include USDH as a settlement asset for spot trading, native minting on HyperCore, and USDH-margined perpetual contracts. The stablecoin’s peg was maintained during early trading, fluctuating minimally to $1.001, as users tested its liquidity mechanisms.

Industry analysts highlighted the potential for USDH to disrupt the stablecoin landscape. Unlike USDC or USDT, which prioritize cross-chain ubiquity, USDH is designed for Hyperliquid’s ecosystem, offering lower trading fees (80% reductions for USDH pairs) and direct value accrual through HYPE token buybacks. However, challenges remain, including regulatory compliance under the GENIUS Act and MiCA, as well as the need to build sufficient liquidity to handle Hyperliquid’s high trading volumes.

The competition for USDH issuance underscored broader trends in DeFi governance. While Native Markets emerged victorious, critics questioned the process’s fairness, noting that larger entities like Paxos and Ethena submitted more robust proposals. Polymarket odds reflected Native Markets’ lead at 56-74%, while Paxos and Ethena trailed at 35% and 10%, respectively. Despite the controversy, the launch of USDH represents a significant step in Hyperliquid’s strategy to capture yield and reduce external dependencies, positioning it as a potential challenger to established stablecoins in the DeFi space.