Hyperliquid to Decide USDH Stablecoin Issuer in High-Stakes Validator Vote
Hyperliquid, a decentralized exchange focused on perpetual futures and operating its own layer-1 blockchain since November 2024, is set to hold a pivotal validator vote this Sunday to select the issuer of its first native stablecoin, USDH. This decision marks one of the most significant community-led governance events in the crypto industry this year.
In July alone, Hyperliquid processed $330 billion in trading volume with a lean team of 11, underscoring the platform’s rapid growth. USDH is intended to become the platform’s primary dollar-pegged asset, offering traders a stable unit of account and collateral within the expanding Hyperliquid ecosystem.
Competitive Landscape Narrowed to Eight Contenders
The race to issue USDH has attracted several prominent firms, with eight candidates remaining after Ethena withdrew and threw its support behind Native Markets. The contenders include Native Markets, Paxos, Sky, Frax Finance, Agora, Curve, OpenEden, and BitGo.
Native Markets: Early Front-runner with Strategic Partnerships
Native Markets was the first to submit a proposal on September 5, explicitly formed to launch the USDH stablecoin on Hyperliquid’s HyperEVM chain. Their plan emphasizes splitting reserve yields equally between HYPE token buybacks and ecosystem development. Native Markets intends to leverage Stripe’s tokenization platform, Bridge, to manage reserves—a choice that has garnered initial validator support but also raised concerns about potential conflicts with Stripe’s blockchain initiatives.
The team behind Native Markets includes notable figures such as Hyperliquid investor Max Fiege, former Uniswap Labs resident MC Lader, and blockchain researcher Anish Agnihotri. Current prediction market odds on Polymarket place Native Markets at 96% likelihood of winning.
Paxos: Regulated Stablecoin Veteran
Paxos, a well-established stablecoin infrastructure provider, also submitted its proposal on September 5. Their USDH design aims to comply with the US Stablecoins Act (GENIUS Act) and the EU’s Markets in Crypto-Assets (MiCA) regulation. Paxos promises that 95% of the interest generated from USDH reserves will be used to buy back HYPE tokens, distributing them among validators, users, and partner protocols.
Paxos highlights its track record of scaling regulated stablecoins, including Binance USD (BUSD) with over $25 billion in circulation and PayPal USD exceeding $1 billion. The company also plans to integrate USDH into its brokerage platform used by PayPal and Venmo. Paxos’ chances on Polymarket stand at 4%.
Other Notable Proposals
Sky: The Ethereum DeFi pioneer behind the decentralized stablecoin USDS (formerly DAI) proposed making USDH inherently multichain via LayerZero interoperability. Sky also committed to deploying part of its balance sheet into Hyperliquid, offering a 4.85% return on USDH and directing profits to HYPE buybacks and an Assistance Fund. Sky’s odds on Polymarket are currently below 1%.
Frax Finance: The protocol behind frxUSD aims to issue USDH in partnership with an unnamed federally regulated US bank. Their approach includes one-to-one backing with tokenized US Treasurys and full compliance with the GENIUS Act, with all treasury yield recycled into the Hyperliquid ecosystem. Frax emphasizes a community-first model but holds less than 1% odds on Polymarket.
Agora: Proposing to launch USDH with VanEck as asset manager, Agora commits 100% of net revenue from reserves to HYPE buybacks or the Assistance Fund. Agora has voiced strong criticism of Native Markets’ reliance on Stripe’s Bridge, warning of conflicts of interest due to Stripe’s own blockchain ambitions.
Other last-minute proposals came from Curve, OpenEden, and BitGo, though these have yet to appear on prediction markets.
Governance Mechanics and Voting Outlook
The USDH vote represents Hyperliquid’s first major governance decision beyond routine asset delistings. Voting will be conducted entirely onchain over a one-hour window on Sunday, with validator voting power proportional to staked HYPE tokens. Delegators may shift their votes during the period. To pass, a proposal requires a two-thirds majority of the total stake.
Notably, the Hyperliquid Foundation and staking provider Kinetiq, controlling approximately 63% of tokens, have pledged to abstain, adding uncertainty to the final outcome.
The lead-up to the vote has coincided with a rally in the HYPE token, which reached a new all-time high of $57.30 on Friday, reflecting growing market interest.
FinOracleAI — Market View
Hyperliquid’s validator vote to select the USDH stablecoin issuer is a critical governance event that could significantly affect token utility and ecosystem growth. Native Markets’ strong early support contrasts with Paxos’ regulatory pedigree, presenting a dynamic competition between innovation and compliance. The abstention by major stakeholders injects unpredictability into the vote outcome. Market participants should monitor voting developments closely, as the winning issuer will gain control over substantial stablecoin flows, potentially impacting HYPE token demand and liquidity.
Impact: positive
