This article is reprinted with permission from TechFLow Deep Tide, author: Yanz, copyright belongs to the original author.
On September 5, 2025, Hyperliquid announced its plan to launch its native stablecoin USDH, led by governance, in the next network upgrade.
The protocol describes USDH as a "Hyperliquid priority and compliant" asset pegged to the US dollar, aiming to replace external stablecoins like USDC and create a self-sufficient DeFi ecosystem.
Unlike traditional stablecoins (such as USDT and USDC) that are issued by centralized entities and monopolize profits, Hyperliquid has implemented an innovative decentralized voting mechanism:
It opens the issuance rights of the $USDH stablecoin to the ecological team instead of launching it independently, integrating a community-driven model into stablecoin issuance.
This move immediately sparked intense competition, with Frax and Paxos submitting proposals, and Ethena Labs also seen as a potential contender. The voting, expected to conclude by September 10, could not only reshape the Hyperliquid ecosystem but also hide the risk of a reshuffle in the stablecoin landscape.
The fierce competition for the issuance of the $USDH stablecoin stems from its strategic value and potential economic returns within the Hyperliquid ecosystem.
Hyperliquid currently holds approximately $5.72 billion in stablecoins, of which 95% is USDC, making it aware of the vulnerabilities of relying on external stablecoins, especially the risk of USDC being frozen.
Starting from September 5, 2025, the issuance rights of $USDH opened through a decentralized voting mechanism is an attempt by Hyperliquid to create a self-sufficient DeFi ecosystem.
Based on a reserve yield of 4% to 5%, the expected annual return from successfully replacing USDC is extremely substantial, potentially reaching $150 million to $220 million. This funding can significantly enhance the value and ecological attractiveness of $HYPE through the repurchase of $HYPE or dividends returned to the community, attracting major players like Paxos and Frax to compete for bids.
In the competition for the issuance of $USDH, the winning team will dominate Hyperliquid's $570 million liquidity pool, bringing long-term benefits and industry influence.
The current competition is heating up, with the proposal deadline approaching on September 10, and various parties committing to increase their stakes, presenting different issuance plans and profit distribution schemes.
Additionally, Ethena Labs, Circle, and Paypal are highly anticipated by the community, with potential proposals that could become dark horses.
However, the plans vary, and the community has raised various doubts. This bidding war is not only about technical competition but also a struggle for the future landscape of DeFi.
Not only is there competition for the issuance of $USDH, but broader changes are also occurring.
Omar Kanji, a partner at Dragonfly, stated that this move could have a significant impact on Circle's USDC. USDC is currently the main settlement currency for Hyperliquid derivatives trading, with USDC deposits on Hyperliquid reaching $5.5 billion.
Assuming a 4% yield, this migration could bring an additional $220 million annual income to HYPE token holders while posing a risk of equivalent revenue loss for Circle, potentially reducing USDC's circulation by 7%.
For Circle and Tether, $USDH will undoubtedly impact their monopoly status, prompting them to accelerate innovation (such as Circle's CCTP V2) to respond to changes in the stablecoin landscape. The stablecoin market may shift from a dual oligopoly (USDT, USDC) to a multipolar structure.
It is evident that Circle's CEO is already restless; on September 8, he stated that they would aggressively enter the HYPE ecosystem, mentioning deploying native USDC and CCTP V2 on HyperEVM as a breakthrough strategy.
However, this is not convincing. After all, this blog post was published on July 31, and Circle claimed that a landing plan was imminent, yet there has been no clear progress since then, with many users expressing skepticism. A highly upvoted comment stated, "You should do better and act faster."
Overall, the latest data shows that the global stablecoin market has surpassed $286 billion, with $USDT (59%) and $USDC (25.2%) collectively accounting for nearly 85% of the market share.
As of September 8, Tether's USDT leads with a circulating market value of $168.8 billion, attracting a large number of traders and retail investors due to its widespread circulation on centralized exchanges (CEX) and low trading costs, while Circle's USDC follows closely with a market value of $72.5 billion, attracting institutional users.
Not only does this directly impact the current dual oligopoly structure of the stablecoin sector, but Hyperliquid's attempt is also providing a model for other DEXs, stimulating platforms like Arbitrum and Optimism to explore similar paths, promoting a transition towards a multipolar stablecoin sector.
This challenge and disruption to the traditional order evoke the classic metaphor in financial history — "the barbarians at the gate."
In the 1989 book "Barbarians at the Gate: The Fall of RJR Nabisco," "the barbarians at the gate" symbolize the challenge of emerging forces to the traditional order.
Today, this metaphor aptly reflects the stablecoin industry, with Hyperliquid as the "barbarian" knocking on the gates of established powers with its innovative $USDH.
$USDH has ignited short-term price volatility, with the price of $HYPE rising by 12.27% within a week. While establishing new standards and forcing established powers to adjust their strategies, the Hyperliquid Foundation and its CEO Jeff currently hold most of the voting power, raising discussions about market fairness, as the concentration of decision-making power faces controversy over centralization.
The wave of change is surging; regardless of where $USDH ends up, the benefits to the community will remain the core constant.
Related: Sky joins the bidding war, aiming to promote Hyperliquid's issuance of the USDH stablecoin.
Original article: “A $USDH Sparks a Stablecoin Battle”
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