Hyperliquid’s USDH Transforms Stablecoin Economics Through a Community-Driven Yield Approach

Hyperliquid has introduced its USDH stablecoin after a fierce contest among leading crypto companies for the right to issue it, marking a significant development in the evolution of decentralized finance (DeFi) and stablecoin technology. The platform revealed the USDH stablecoin on September 5, 2025, utilizing a transparent on-chain voting process to determine the issuer. Validators will cast their votes, with the final decision set for September 14. The new stablecoin is designed to replace third-party tokens such as

within Hyperliquid’s network, redirecting reserve-generated yields to support token buybacks and ecosystem growth.

Six major candidates entered the competition to issue USDH, each presenting unique advantages. Native Markets, established by Hyperliquid supporter Max Fiege, was the first to submit a proposal, utilizing Stripe’s Bridge payment system, though it met with resistance from the community. Paxos, a regulated stablecoin provider, offered to allocate 95% of reserve interest to HYPE token buybacks and partnered with

and Venmo for fiat on-ramp services. Frax suggested a full yield-sharing model using its frxUSD, which is backed by BlackRock’s BUIDL fund. Agora pledged to reinvest all net revenue into HYPE buybacks and liquidity, while Sky (previously MakerDAO) promised a 4.85% yield on USDH and $25 million in liquidity for DeFi initiatives. Ethena Labs, the issuer of USDe, focused on regulatory compliance and partnerships with Anchorage Digital and , with USDH initially collateralized by USDtb, a tokenized U.S. Treasury bill.

Unlike conventional stablecoins such as USDC, USDH incorporates mechanisms for generating yield and sharing revenue. In accordance with the U.S. GENIUS Act, USDH adheres to regulatory requirements while avoiding direct interest payouts to holders—a limitation faced by Circle’s USDC. Instead, USDH distributes returns within the Hyperliquid ecosystem through buybacks and validator incentives, creating a self-sustaining economic structure. This model could transform the stablecoin sector by channeling substantial yield back to the Hyperliquid community instead of external parties. However, the EU’s MiCA regulations, which prohibit algorithmic and yield-generating stablecoins, could restrict USDH’s international expansion.

The competition for issuance rights sparked heightened market activity, with HYPE’s value climbing 23.4% in the week ending September 8, 2025. Large-scale investors, including a $12 million HYPE acquisition by “qianbaidu.eth,” demonstrated strong faith in the ecosystem. Bernstein analysts observed that USDH’s adoption could pose a challenge to USDC’s leadership, especially in yield-focused DeFi sectors, though building liquidity will take time. Jamie Elkaleh of Bitget emphasized that USDH could decrease dependence on external stablecoins and reshape protocol incentives.

The issuer will be chosen based on validator votes, which are weighted by staked HYPE. Native Markets currently leads with about 70% of pledged votes, while Paxos has around 23%. The Hyperliquid Foundation has opted not to vote, ensuring the decision rests with the community. The winning issuer will gain access to Hyperliquid’s $5 billion in USDC reserves, a key resource for expanding USDH’s reach. Sky’s proposal, featuring an $8 billion balance sheet and a 4.85% yield, remains a strong competitor.

Industry observers warn that USDH’s future depends on regulatory certainty and robust liquidity infrastructure. Jeremy Allaire of Circle highlighted USDC’s strengths in liquidity and interoperability, while acknowledging the innovative governance behind USDH. The outcome of the vote will determine Hyperliquid’s direction, potentially transforming it from a high-volume trading platform into a self-sustaining DeFi ecosystem. With the introduction of USDH, Hyperliquid seeks to reshape stablecoin economics, aligning the interests of users, validators, and the wider crypto community.