Organization & Compilation: Deep Tide TechFlow

Guests: Gordon Liao (Chief Economist of Circle), Ram Ahluwalia (Co-founder and CEO of Lumida Wealth), Chris Perkins (Managing Partner of CoinFund)

Host: Austin Campbell

Original Title: The Fed, China, and CLARITY + Coinbase Eats USDH

Podcast Source: Unchained

Broadcast Date: May 19, 2026

Edit Intro

In this episode of the podcast, Circle's Chief Economist Gordon Liao systematically elaborated for the first time on the market structural logic behind USDH being replaced by USDC. The balance of USDC on the Hyperliquid platform has doubled in the past year, with 90% of reserve earnings flowing back to Hyperliquid for repurchasing HYPE, while Coinbase acts as the treasury deployment party and Circle serves as the technology deployment party, staking 500,000 HYPE.

Gordon also broke down the long-term U.S. Treasury yield. The current 30-year yield surpasses 5%, mainly driven by term premium, while stablecoins are quietly becoming marginal buyers of U.S. Treasuries. In Q1 2026 alone, the on-chain settlement volume of USDC reached $21 trillion, and the concentrated purchase of short-term U.S. Treasuries by stablecoins effectively lowers the overall weighted duration of U.S. Treasuries, likely providing inverse support for long-term rates.

Additionally, the program's judgment on the bottlenecks of the CLARITY Act and the divergence over where AI value is captured following the OpenAI lawsuit are worth noting.

Highlights

USDH Replaced by USDC

• "This is essentially a liquidity supernova event. As the most dominant perpetual contract platform on-chain, the collateral used will also radiate throughout the entire on-chain economy."
• "The governance vote from eight or nine months ago chose a different reference asset. But as the platform grows and matures, they need to interact with more traditional institutions, and the use of high-quality, institutional-grade collateral is a key part of that."
• "Any place that can intercept TVL—be it exchanges or prediction markets—will find ways to monetize this floating rate, why give this money to a third party?"
• "For Coinbase and Circle, this is a strategic move to neutralize an emerging competitor. Coinbase, as the collateral manager, positions itself at a critical juncture of this new infrastructure."

Multiple Attributes of Stablecoins

• "Regarding whether stablecoins are a medium of exchange or a store of value, we see that they can be multiple things at once. In payment scenarios, it serves as a medium of exchange, and in this context, it acts as a carrier of capital liquidity and collateral liquidity. As the system scales up and institutionalization grows, the latter will become more important."
• "Agents probably want a money market fund that continuously pays interest while idle, but as soon as they make a payment, they will want that money packaged as stablecoins. The compliance paperwork alone using securities for payment is unbearable."

OpenAI Case and AI Value Capture

• "There is almost no value capture at the LLM layer. These AI labs spend hundreds of billions to provide free services to people like us, essentially performing public service. The value of LLM lies in the model weights, that's called IP."
• "Whoever controls the end user delivers the most value. Value mainly falls on the application layer and the cloud business, as well as AI implementation service providers, such as Accenture, will profit handsomely."
• "I think this is a barbell structure. Aside from the distribution side, the other end is energy. Those who can access almost free energy and cheap computing power will win. Elon has an advantage in this regard."

About the CLARITY Act

• "The compromise proposal by Thom Tillis and Angela Alsobrooks essentially separates the value storage function, settlement function, and unit of account function of currency."
• "We are approaching the Hillary's Step of this mountain (the final hurdle to the summit of Everest). There is also the issue of committee seats and ethical issues, which will be very challenging to overcome."
• "From the beginning, I have felt that the banking sector's battle has been very Don Quixote-like. What do you actually want to achieve? Are you just stabbing each other, or sending a great gift to asset management firms?"

Long-term U.S. Treasuries and Rates

• "The upward momentum of the 30-year yield mainly comes from term premium, which is currently around 80 bps, quite high compared to the negative values two years ago. This means the market reflects supply and demand dynamics, not expectations of future short-term rates."
• "The narrative that stablecoins are marginal buyers of U.S. Treasuries is more substantial than the credit people give it. Its duration is very short, concentrated in short-term Treasuries and reverse repos. This effectively releases the Treasury's space to issue more debt in the short term, and when weighted by dollar duration, it reduces the supply of long-term U.S. Treasuries in the market."
• "Investors are saying: I need more compensation to hedge against greater inflation risks. That's all there is to it. They know the Fed is not inclined to cut rates."

Coinbase and Circle Join Forces to Acquire USDH

Austin Campbell (Host): Hello everyone, welcome to Bits + Bips, where we explore how crypto and macro collide in basis points. I'm your host Austin Campbell, and today's guests are Ram Ahluwalia, co-founder and CEO of Lumida Wealth, Chris Perkins, managing partner of CoinFund, and Gordon Liao, chief economist of Circle. Today there are several topics related to interest rates and news, and I particularly look forward to Gordon's perspective.

Let's start with Circle today. Coinbase and Circle have basically taken over USDH. USDC will be crowned as the quote asset aligned with Hyperliquid (the on-chain perpetual contract DEX). Native Markets, which won the governance competition eight months ago, is now acquired by Coinbase. USDH holders will redeem to USDC during the migration period, with Coinbase becoming the official reserves management/deployment partner for USDC on Hyperliquid, and Circle responsible for the technical access and operational infrastructure of USDC on Hyperliquid, staking 500,000 HYPE towards validator seats. 90% of reserve earnings will flow back to Hyperliquid, which should be used for HYPE repurchase via an aid fund.

Roughly speaking, there is currently about $5 billion USDC on Hyperliquid, with an yield of less than 4%, approaching an annualized income of nearly $200 million. Most of this money will flow to Hyperliquid, Coinbase will take a portion, while Circle gains a new deployment position for USDC, continuing to chase Tether's scale.

The bullish logic is that there is a deeper order book, less slippage, faster deposits and withdrawals, and better market maker support, with HYPE tied to platform fees, staking, and Builder activities. Bitwise is also applying for a spot HYPE ETF. The bearish side, such as ZachXBT, is concerned that if the core collateral, quote assets, and liquidity of Hyperliquid increasingly rely on USDC, the whole system hands over part of its fate to Circle/Coinbase/regulatory orders. There are also governance issues with Native Markets. Chris, as an investor in this space, what’s your take?

Chris Perkins: I think this is one of the series of actions we will see next, and the keyword is "net interest income." If we take a step back and look at the traditional model of exchanges: you earn by collecting transaction fees, skimming a bit off each trade; usually, the clearing part isn’t profitable, although it has become a new business line in our circle, sometimes earning a little money off data. But the real big money comes from net interest income.

In traditional finance, the operation is that customers deposit dollars as collateral, and you give those dollars to the clearinghouse, which invests them, keeping a large portion for itself and returning a small portion to you. That’s your net interest margin. This is a fundamental component of any exchange business model. Many decentralized applications in the past overlooked this and have given this handsome income away for free. Now they realize they need to reclaim this.

I can tell you that any place that can intercept TVL—be it exchanges, apps, or prediction markets—will find ways to monetize this floating rate. Why give it to a third party?

From the exchange’s perspective, this is the bullish logic—Hyperliquid increased after the news came out because this circle (a pun on Circle) has closed. You’ve solved the net interest income issue, and returns come back to token holders. If you’re on the Circle/Coinbase side, you’re a winner too—the details are, of course, in the terms, such as how long the peg period is or how often the rates are renegotiated; I don’t know if Gordon can reveal this. But what you get is a widely accepted stablecoin; the more USDC circulates, the more likely end users will accept it as a payment method.

So USDC is winning as well. Perhaps in the future, both parties will adjust the economic terms. Hyperliquid wins big, resolving the net interest income; Circle gets greater adoption, broader scale, wider distribution, and the hoped-for incremental utility. I think this is a win-win.

Austin Campbell: Gordon, I want to toss a question to you. I know Circle well, and USDC has many different facets in the current market. From a market structure perspective, Americans are used to viewing money as layered; the money used to buy coffee is not the same as the money for settling derivatives. But we are now starting to see USDC used for many things simultaneously, its substitutability is increasing. How do you view this from Circle’s perspective? How does it look at market structure through your economic background?

Gordon Liao: A few observations. First, we are witnessing the overall maturation of infrastructure. Hyperliquid is the dominant platform for on-chain perpetual contracts today and has grown significantly in scale. The balance of USDC on this platform has roughly doubled year over year.

The governance vote from eight or nine months ago did indeed choose a different reference asset. But as the platform grows and matures, they need to interact with more traditional institutions, and utilizing high-quality, institutional-grade collateral is a key part of that. Choosing USDC acknowledges its underlying security and the 1:1 reserve commitment.

As Chris mentioned, this is a win-win and also a liquidity supernova event. As the most dominant perp platform on-chain, the collateral used will radiate throughout the entire on-chain economy, so this is a major liquidity event that will encourage the use of USDC and other related infrastructures.

We deployed USDC on Hyperliquid back in September last year, along with the CCTP (Cross-Chain Transfer Protocol). So it has been there for a while, but this time it’s a very good "reconfirmation" event.

Regarding whether stablecoins are a medium of exchange or a store of value, we see that they can simultaneously be several things. In some scenarios, they serve as payment mediums; in others, they can act as carriers of capital liquidity and collateral liquidity. As the system grows and institutionalization increases, the latter will become increasingly important.

A similar trend is also evident in settlement volumes. Our recent financial report disclosed that Q1 USDC on-chain settlement volume was $21 trillion. This reflects that the infrastructure is expanding, and liquidity on the largest platforms—be they centralized or decentralized—is improving.

Austin Campbell: Following this line, the circulation of USDC is actually highly tied to Coinbase. Coinbase has many products born out of USDC, such as debit cards, credit card payments, and corporate payments. Now we also see it becoming the core asset of exchanges like Hyperliquid. Ram, from a market perspective, does this make you more bullish or bearish on Coinbase and Circle stocks?

Ram Ahluwalia: This is favorable for everyone and especially advantageous for Hyperliquid. For Coinbase and Circle, they have successfully neutralized an emerging competitor. Coinbase, as the collateral manager, strategically positions itself at a critical junction in this new infrastructure.

For Hyperliquid, keeping 90% of revenues is a return for its achievements over the past few years. We discussed Hyperliquid three or four weeks ago; it is one of the assets you want to hold in this cycle. Coinbase’s foresight in acting first is very forward-looking, as Hyperliquid is becoming a core decentralized trading venue. Circle has secured a substantial ongoing net interest income. So it’s a situation where everyone benefits, especially beneficial for Hyperliquid.

This ties back to another topic we discussed earlier: distribution will ultimately drive most of the profits in this system. Gordon, you also mentioned Hyperliquid is the emerging perp DEX in the crypto space. All these parties coming together essentially acknowledge the importance of distribution and the position of users; this main theme will continue to recur when determining the winners and losers.

OpenAI Lawsuit

Austin Campbell: Speaking of users and winners, today Elon Musk lost, and Sam Altman won, at least in the first round. The Oakland federal jury unanimously dismissed all of Musk's claims in less than two hours. The crux of the ruling lies in a three-year statute of limitations, the jury found that Musk knew in 2021 that OpenAI had shifted to a for-profit model, and he didn’t file the lawsuit until February 2024.

He originally sought $134 billion in "ill-gotten gains" and to oust Altman and Brockman from leadership roles, citing the profit restructuring in 2025. However, the substantive issues of the case, including breach of charitable trust and unjust enrichment, were not adjudicated. The Musk team has indicated they will appeal. Wired magazine commented that both sides painted each other as self-serving during the court hearing, with neither Musk nor Altman coming off well. Subsequent interpretations suggest that at least during the transition period, OpenAI may be able to go public.

A few reactions on X are worth reading. Structural skeptics say that legally this is a big win for OpenAI, but the larger political and systemic issues remain unresolved—what does it mean for an organization that established public legitimacy with a "non-profit, human-first" mission to become one of the most valuable commercial platforms in the world? News24 commented that a non-profit machine established to benefit humanity has forcibly transitioned into a closed profit machine supported by Microsoft. The court trial indeed revealed broken commitments around openness and security. Chris, what are your thoughts?

Chris Perkins: It seems the statue of limitations exceeded the facts, which is quite straightforward. I don’t know how Musk's lawyers will appeal, but they’re smart and surely can come up with a way.

At this point, Ram usually points out something negative about OpenAI, saying they are making a big deal out of it. Before he speaks, the larger issue is in the crypto space, where many foundations were designed as non-profit organizations amidst regulatory pressure over the past four years, while also having Labs. I hope there can be a clear precedent to clarify the relationship between foundations and Labs. Many protocols currently cause confusion regarding who is responsible for what.

I’m not saying foundations are useless; they absolutely have non-profit ideals to advance, such as in Ethereum’s cryptographic research. But the motivations for many foundations may be to seek protection when facing a very aggressive regulator. So this case will have profound implications for the crypto space. Sam is also getting more involved in this circle now.

Ram Ahluwalia: Chris, you just set the ball right to me. I didn’t expect this case would lead to any big stir, so indeed nothing has happened; it’s really making a big deal out of nothing.

Austin Campbell: Time is up, a special thank you to you all for being here today; the timing is perfect, and I hope our audience benefits from your perspectives.

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