TLDR
- Hyperliquid is moving toward launching its own stablecoin, USDH, to reduce reliance on Circle’s USDC.
- Ethena Labs proposes a unique USDH model backed by USDtb and pledges to return 95% of net revenue to Hyperliquid.
- Paxos focuses on regulatory compliance and plans to integrate PayPal and Venmo for USDH transactions.
- Frax Finance aims to distribute all Treasury yield from USDH to Hyperliquid users, targeting DeFi enthusiasts.
- Sky Ecosystem offers a decentralized USDH issuance model with a focus on platform growth and a 4.85% yield.
Hyperliquid’s push to launch its own stablecoin, USDH, has ignited fierce competition. As the Sept. 14 vote nears, several firms have submitted proposals, each with a different strategy. The outcome will shape the future of USDH and Hyperliquid’s dominance in the crypto market.
The stablecoin could significantly reduce Hyperliquid’s reliance on Circle’s USDC. Currently, USDC makes up a large portion of Hyperliquid’s reserves, generating around $200 million annually for Circle. Hyperliquid aims to create a new, in-house stablecoin to capture more of this revenue and increase control over liquidity.
USDH Proposal by Ethena Aims to Innovate
Ethena Labs’ proposal for USDH introduces a unique approach. Their stablecoin would be fully backed by USDtb, a stablecoin tied to BlackRock’s BUIDL fund. Ethena has promised to return 95% of net revenue from USDH reserves to the Hyperliquid ecosystem.
The company aims to offer a competitive edge by covering the cost of migrating existing USDC pairs. Ethena’s commitment to innovation sets its proposal apart, especially with the backing of Anchorage Digital Bank. This strategy could make USDH a valuable asset within the Hyperliquid ecosystem, driving growth and sustainability.
Sam, a research analyst at Messari, commented on Ethena’s proposal:
“The commitment to growing the USDH product beyond USDC is compelling.”
Ethena’s approach stands out for its reward-incentivized collateral and integration of diverse assets like BTC and HYPE. This could enhance USDH’s utility and attract a broader user base.
Ethena just dropped the best USDH proposal.
The number one priority for USDH is a long-term, synergistic partner. We've gotten too wrapped up in meaningless terms like "community-aligned" — the only alignment is revenue potential and the price of $HYPE (one in the same for… https://t.co/9gSJ0YCWJ2
— Sam (@0xCryptoSam) September 9, 2025
PayPal and Venmo Partnership Expands USDH Reach
Paxos, known for its involvement with Binance’s BUSD and PayPal’s PYUSD, has submitted its own proposal. Their version of USDH focuses on regulatory compliance and integration with PayPal and Venmo. Paxos plans to direct 95% of reserve yield towards HYPE buybacks, aligning with Hyperliquid’s goals.
Paxos stands out for its strong regulatory track record and commitment to NYDFS and EU MiCA compliance. These assurances provide a level of institutional security that appeals to larger investors and institutions. The proposed partnership with PayPal and Venmo could expand USDH’s reach significantly, especially among mainstream users.
By focusing on regulatory assurance, Paxos aims to differentiate itself from other proposals in the race for USDH. However, their approach is less innovative compared to competitors like Ethena, which prioritize decentralized features. Nevertheless, Paxos’s institutional appeal may help it secure a favorable position in the final vote.
Frax and Sky Target DeFi Community with USDH
Frax Finance has taken a decentralized approach with its USDH proposal. The company aims to mint USDH at parity with frxUSD and Treasuries, directing all Treasury yield to Hyperliquid users. This approach is designed to maximize yield distribution for USDH holders, appealing to the DeFi community.
Frax’s focus on decentralized finance mechanisms makes its proposal attractive to users seeking transparency and yield-driven incentives. However, the challenge lies in convincing institutional investors to adopt a more decentralized model. Frax’s transparent approach contrasts with Paxos’s regulatory compliance, offering a different appeal in the stablecoin market.
Sky Ecosystem, previously known as MakerDAO, has also put forward a decentralized issuance model for USDH. With an $8 billion balance sheet, Sky offers a 4.85% yield and plans to integrate a buyback system within Hyperliquid. The Sky proposal focuses on growing the platform and creating a more sustainable ecosystem, a key factor in its appeal.
