Sky's $8B Bet: Can It Redefine DeFi's Stablecoin Future?

Sky, formerly known as MakerDAO, has submitted a proposal to power Hyperliquid’s USDH stablecoin, leveraging its $8 billion balance sheet and a B- S&P credit rating, the first ever issued to a decentralized finance (DeFi) protocol [2]. The proposal outlines a 4.85% return on USDH held on Hyperliquid, surpassing the yield of Treasury bills, with the generated revenue earmarked for HYPE buybacks and the Assistance Fund [2]. Sky also pledges $2.2 billion in instant redemption liquidity through its Peg Stability Module, designed to give institutional traders confidence in moving in and out of USDH at scale [2]. Additionally, the proposal includes a $25 million investment in a “Hyperliquid Genesis Star” initiative, modeled after Sky’s existing Spark token farm, which has attracted over $1 billion in total value locked (TVL) [2]. This initiative is intended to bootstrap DeFi on Hyperliquid and potentially attract billions in deposits. Sky further plans to migrate its native buyback engine, which generates more than $250 million in annual profits, onto the Hyperliquid platform [2].

Hyperliquid, a decentralized perpetuals exchange, has invited multiple crypto protocols to submit proposals for the USDH stablecoin deployment contract. It handled nearly $400 billion in trading volume last month and holds $5.5 billion in USDC deposits, approximately 7.5% of that stablecoin’s supply, making the contract one of the most lucrative in DeFi [2]. The Hyperliquid Foundation will abstain from voting as validators prepare to cast their votes on September 14 [2]. Sky’s bid is the fifth received, with other notable proposals coming from Paxos, Agora, Frax, and Native Markets. Each proposal presents unique value propositions, with Paxos offering 95% of reserve earnings to HYPE buybacks and a zero-fee USDC migration [2]. Frax has proposed a “community-first” wrapper model where 100% of Treasury yield would directly flow to users [2]. Agora, supported by State Street, VanEck, and MoonPay, has pledged to direct 100% of net revenue into HYPE buybacks, emphasizing neutrality [2]. Native Markets, aligned with Stripe’s Bridge, faces scrutiny due to potential conflicts of interest tied to Stripe’s Tempo blockchain and its ownership of wallet provider Privy [2].

Sky’s proposal also includes a customizable USDH that can be adapted to align with U.S. stablecoin legislation under the GENIUS Act [1]. This act, signed into law by President Donald Trump in July 2025, mandates that stablecoins be backed 1:1 by high-quality liquid assets and establishes a regulatory framework for permitted issuers, including bank subsidiaries, non-bank entities approved by the Office of the Comptroller of the Currency (OCC), or state-licensed non-bank issuers with a market cap under $10 billion [5]. The act enforces monthly public disclosures of reserves and sets an 18-month implementation period for regulatory compliance [5]. Sky’s proposal gives Hyperliquid the flexibility to adjust USDH in accordance with these federal requirements, providing a competitive edge over other bidders who may not offer similar regulatory adaptability [1].

The USDH stablecoin represents a strategic move in the broader DeFi ecosystem. By choosing a stablecoin partner, Hyperliquid aims to establish a robust monetary layer that supports its growing trading volume and user base [2]. Sky’s proposal stands out due to its combination of financial backing, regulatory flexibility, and ecosystem development incentives. The 4.85% yield on USDH is a strong financial incentive, particularly for institutional users who prioritize stable and predictable returns [2]. Moreover, Sky’s Peg Stability Module offers liquidity assurance, which is critical for a stablecoin’s adoption and usability in high-volume trading environments [2]. The $25 million investment in the “Hyperliquid Genesis Star” initiative is intended to catalyze further DeFi integration on Hyperliquid, potentially attracting billions in additional deposits and boosting the platform’s overall utility and appeal [2].

The decision will determine whether USDH is structured as a Genius-compliant, user-yielding, or Hyper-native stablecoin. It will also establish whether Hyperliquid’s monetary layer is tied to a legacy stablecoin giant, a DeFi-native upstart, or a corporate payments firm with blockchain ambitions [2]. With multiple bidders in the running and Ethena hinting at a potential bid, validators face a complex decision that will shape the future of USDH and Hyperliquid’s financial infrastructure [2]. The outcome is expected to reflect the preferences of the Hyperliquid community and its validators, who will weigh the financial, regulatory, and strategic merits of each proposal.

Source: [1] Sky Joins Bidding War for Planned Hyperliquid Stablecoin (https://cointelegraph.com/news/sky-bidding-war-launch-hyperliquid-usdh-stablecoin) [2] Sky Pitches Genius-Compliant USDH Stablecoin With $8B Balance Sheet and 4.85% Yield (https://www.coindesk.com/markets/2025/09/09/sky-pitches-genius-compliant-usdh-stablecoin-with-usd8b-balance-sheet-and-4-85-yield) [3] Sky Pitches Genius-Compliant USDH Stablecoin With $8B Balance Sheet and 4.85% Yield (https://finance.yahoo.com/news/sky-pitches-genius-compliant-usdh-050600097.html) [4] Stablecoin Has Arrived. Is The Payments Revolution Next? (https://www.investors.com/news/stablecoin-genius-act-payments-revolution/) [5] GENIUS Act Is Officially Law — Now What? The Most Important Deadlines Stablecoin Businesses Should Know (https://frblaw.com/genius-act-is-officially-law-now-what-the-most-important-deadlines-stablecoin-businesses-should-know/) [6] Sky Proposes USDH Stablecoin Backed by $8 Billion and 4.85% Yield (https://holder.io/news/sky-proposes-usdh-backed-by-8b-yield-4-85/)