Validators to Decide USDH’s Future as Hyperliquid Challenges Stablecoin Status Quo

Bastion co-founder has emphasized the importance of promoting Hyperliquidity migration to USDH, suggesting that new markets should natively support this stablecoin. The USDH ticker is reserved for Hyperliquid’s compliant stablecoin, triggering a competitive landscape among major issuers such as Paxos, Frax Finance, Agora, and Native Markets. Validator voting will determine the successful proposer.

The USDH stablecoin aims to capture a significant portion of the stablecoin market, where Hyperliquid currently holds approximately $5.5 billion in USDC deposits, accounting for around 7.5% of the circulating supply. This figure highlights Hyperliquid’s growing influence in the space, particularly with its decentralized model and leadership in trading volumes. The platform has not accepted venture capital funding, which may enhance its appeal to users seeking a more autonomous and community-driven stablecoin solution.

Paxos Labs submitted a proposal for USDH that focuses on compliance with MiCA and the GENIUS Act. The plan includes directing 95% of interest to $HYPE buybacks and offering seamless, zero-fee transitions from USDC to USDH. Additionally, the redistributed tokens would support ecosystem initiatives, partners, and users. This approach underscores the potential for USDH to serve as a catalyst for broader ecosystem growth, while maintaining regulatory alignment.

Frax Finance proposed a different model, backing USDH 1:1 with frxUSD, which is supported by BlackRock’s BUIDL treasury fund. This structure ensures that 100% of the yield from the Treasury will flow to Hyperliquid users without any take rate from Frax. This approach prioritizes community benefits and may appeal to users seeking transparent and high-yield mechanisms within the USDH framework.

Agora and Native Markets also presented compelling cases. Agora’s coalition proposal includes revenue sharing, global card coverage via Rain, and LayerZero interoperability, with funds allocated to the Hyperliquid Assistance Fund or HYPE token buybacks. Native Markets, supported by former Uniswap Labs President MC Lader, included Bridge integration in their submission, promising revenue sharing but not disclosing exact percentages. These proposals reflect a broader trend of market participants aligning with Hyperliquid’s ecosystem to strengthen USDH’s adoption and utility.

The Hyperliquid Foundation confirmed it would not vote in the selection process, and USDH will not be the exclusive stablecoin on the platform’s blockchain. This decision allows for greater market competition and flexibility, potentially fostering innovation in how USDH is integrated into different financial products and services. As the stablecoin landscape evolves, USDH’s native support in new markets could significantly impact trading volumes and liquidity metrics across decentralized platforms.