Ethena Withdraws from Hyperliquid USDH Stablecoin Race, Boosting Native Markets’ Prospects

Ethena Withdraws from USDH Bid, Ceding Lead to Native Markets

Ethena, the team behind the USDe synthetic dollar protocol, announced its withdrawal from the competitive process to issue Hyperliquid’s upcoming native stablecoin, USDH. This move follows direct discussions with community members and validators who expressed concerns over Ethena’s status as a non-native Hyperliquid project.

In a statement on X (formerly Twitter), Ethena Labs founder Guy Young acknowledged the pushback and congratulated rival Native Markets, which is now widely viewed as the frontrunner. Young emphasized that the process exemplifies Hyperliquid’s community ethos, where emerging players have a fair chance to succeed.

Native Markets Gains Dominance in Voting Predictions

Ethena’s exit significantly reshapes the USDH bidding landscape. Prediction markets on Polymarket currently assign Native Markets a 92% probability of winning the mandate to issue USDH, with Paxos trailing at approximately 7%. The vote itself will be conducted on-chain, with validator influence proportional to the amount of staked HYPE tokens. A two-thirds majority is required for any proposal to pass.

Controversy Surrounds the USDH Bidding Process

Despite Ethena’s positive framing, some industry voices have raised concerns about the fairness and transparency of the selection procedure. Haseeb Qureshi, managing partner at Dragonfly Capital, criticized the process as potentially biased, noting that Native Markets appeared ready with a bid immediately after the Request for Proposals (RFP) was announced. This led to speculation that Native Markets had prior knowledge or preferential treatment.

Lilian Aliaga, COO of OAK Research, also questioned how Native Markets secured over 70% of committed votes so early, suggesting possible bias within the validator community. Conversely, others like Sam MacPherson of Phoenix Labs consider it plausible that Native Markets is the best fit, while acknowledging Paxos’ established track record in fiat-backed stablecoin issuance.

High Stakes for Hyperliquid and the Stablecoin Market

The decision carries significant implications for Hyperliquid, which currently holds about $5 billion in USDC on its platform. David Lawant, head of research at FalconX, estimates this represents roughly 10% of Circle’s business, equating to around $200 million in annual revenue. The outcome will influence both Hyperliquid’s ecosystem and the broader stablecoin landscape.

Voting Mechanics and Timeline

The USDH vote is Hyperliquid’s first major governance decision beyond routine asset management. Validators cast votes weighted by their staked HYPE tokens, with delegators able to redelegate stakes to validators aligning with their preferences. Notably, the Hyperliquid Foundation and liquid staking provider Kinetiq—together controlling about 63% of the stake—have pledged to abstain from voting.

Proposals closed midweek, with validators given 24 hours to signal support and a brief redelegation window following. The final vote is scheduled for Sunday between 10:00 and 11:00 UTC.

Native Markets’ Proposal and Controversies

Native Markets, led by Hyperliquid investor Max Fiege, former Uniswap Labs executive MC Lader, and blockchain researcher Anish Agnihotri, positions itself as the most “Hyperliquid-native” candidate. Their proposal includes minting USDH on HyperEVM and allocating half the interest generated from USDH reserves to buy back HYPE tokens through the Assistance Fund, with the remainder supporting ecosystem growth.

USDH would be collateralized by cash and short-duration US Treasurys. Off-chain reserves are planned to be managed initially by BlackRock, while on-chain reserves will be overseen by Superstate via Stripe-owned Bridge. This reliance on Bridge has drawn criticism for potentially creating a central point of failure.

Agora founder Nick VanEck expressed concerns about possible conflicts of interest due to Stripe’s involvement, questioning the implications of entrusting Hyperliquid’s canonical stablecoin to a vertically integrated issuer.

Fiege acknowledged the scrutiny on X, stating, “We know we’re a new team and don’t take the burden to prove ourselves lightly.”