Introduction

Hyperliquid is leaking value.

Hyperliquid’s stablecoin supply has hit an all-time high of $5.8B, yet 95% of that supply is USDC, meaning reserve yield flows out of the ecosystem. At today’s rates, that’s over $230M in annual revenue that could instead fund Hyperliquid’s Assistance Fund, HYPE buybacks, or validator rewards.

To change this, the protocol reserved ticker USDH has been made available for a new, natively minted and fully compliant stablecoin.

The process is now live: issuers are submitting proposals, and on 14th September, validators will vote on which team gets the ticker. Whoever wins the vote can then purchase the ticker from the protocol.

This report covers each proposal, comparing how different issuers plan to structure backing, compliance, value capture, liquidity, and governance, and what those tradeoffs mean for Hyperliquid’s future.

Proposals

Multiple issuers have stepped forward to compete for the USDH ticker, each offering a different mix of compliance posture, reserve design, revenue distribution, and adoption strategy.

The decision is not just about who can launch the fastest but rather how much value flows back to Hyperliquid, and how aligned each issuer is with the ecosystem.

In the sections that follow, we break down each proposal using the same framework:

Backing & Compliance – how the stablecoin is issued and regulated.
Value Capture – how much reserve yield is returned to Hyperliquid.
Liquidity & Market Structure – what integrations ensure deep, stable markets.
Governance & Risk – how control and safety are managed.
Extras / Differentiators – the unique edge each issuer brings.

This structure enables validators to compare options directly, striking a balance between credibility and driving long-term ecosystem growth.

Paxos Labs

Paxos brings institutional rails and a PayPal partnership, rounding out a compliance-first bid with global payment integration.

Backing & Compliance

Paxos operates under a New York Trust Charter and is already licensed across major jurisdictions (US, EU, APAC, MENA, LatAm). USDH would be issued GENIUS- and MiCA-compliant, backed by US Treasuries, repos, cash, and Paxos’s own USDG stablecoin.

Value Capture

Paxos commits 95% of reserve yield to Hyperliquid. They take nothing until USDH passes $1B TVL, and even beyond that, their fee is capped at 5% (paid in HYPE) once TVL exceeds $5B. Governance votes at each milestone determine the allocation split, with more directed to the Assistance Fund as USDH grows.

During the initial phases of TVL growth, ecosystem incentives can be utilised to bootstrap liquidity and integrations across markets. Once the TVL reaches a certain point, the majority of the yield can be routed to the Assistance Fund, as can be seen in the graph below.

Liquidity & Market Structure

Through Paxos’s payments network, USDH would be natively convertible from USDC, PYUSD, and USDG, with on/off-ramps across SWIFT, ACH, and wire rails. Early incentives will be deployed to bootstrap liquidity across spot and perp markets, alongside new tokenised HLP products to deepen HIP-3 liquidity.

Governance & Risk

Revenue distribution is transparent but milestone-dependent, which may slow the initial process within Hyperliquid, as the yield is distributed between the Assistance Fund (AF) and the Ecosystem, requiring governance approval on how the distribution occurs within the ecosystem. Additionally, dependence on regulatory approvals (e.g., PayPal and Venmo listing HYPE) is a risk factor outside of Hyperliquid’s direct control.

Extras / Differentiators

PayPal integration: Paxos commits $20M in incentives, HYPE listing on PayPal/Venmo (pending approval), and USDH integration into PayPal Checkout, Braintree, Hyperwallet, and Xoom.
Proven track record: Paxos has scaled Binance USD to $25B+ and PayPal USD to $1B+, with $160B cumulative issuance across prior stablecoins.
Hyperliquid alignment: Paxos acquired Molecular Labs, the infra provider behind LHYPE and WHLP. They commit to extending builder codes to enterprise platforms, onboarding new asset issuers via HIP-3, and building Earn + tokenised HLP products to help deployers bootstrap and scale liquidity.

Frax

Frax positions USDH as a fully onchain, yield-forwarding stablecoin that streams 100% of Treasury yields back to Hyperliquid.

Backing & Compliance

USDH would be issued in collaboration with a federally regulated US bank to meet GENIUS requirements. Reserves are anchored in tokenised Treasuries via BlackRock, Superstate, and WisdomTree, supplemented by cash. Frax’s long track record in DeFi and active role in US policy discussions add credibility to their compliance stance.

Value Capture

Frax commits 100% of Treasury yield to Hyperliquid. The yield can be directed to HYPE staking rewards, buybacks, trader rebates, or incentives for USDH holders. Importantly, distribution is programmatic and transparent, with governance able to adjust allocations at any time.

Liquidity & Market Structure

Through FraxNet, which already connects 20+ chains, USDH would be multichain from day one. FraxNet also enables real-time programmatic streaming of reserve yield to Hyperliquid sinks, ensuring continuous onchain flow of value. Mint and redeem functions would extend across frxUSD, USDC, USDT, and fiat, with underlying tokenised Treasuries providing liquidity depth.

Governance & Risk

While the yield passthrough is compelling, Frax still relies on partnerships with a US-regulated bank for issuance, which introduces an external dependency. In addition, the complexity of Frax’s broader ecosystem may be viewed as both a strength and a risk in terms of operational focus.

Extras / Differentiators

DeFi credibility: Frax has operated since 2020 and manages over $1B in TVL across frxUSD, FRAX, frxETH, FPI, Fraxswap, and Fraxlend.
Policy involvement: Founder Sam Kazemian has been active in Washington during stablecoin bill negotiations, giving Frax outsized visibility in regulatory debates.
Innovation track record: Frax pioneered mechanisms like the Fractional-Algorithmic FRAX and has consistently delivered new products across stablecoins, ETH staking, and DeFi infrastructure.

Native Markets

Native Markets positions USDH as the Hyperliquid-first stablecoin, designed by aligned builders to keep value inside the ecosystem rather than flowing to external issuers.

Backing & Compliance

USDH would be issued on HyperEVM with seamless interoperability to HyperCore, making Hyperliquid the ledger of record. Reserves are fully backed by cash and US Treasuries, managed offchain by BlackRock (with Fidelity and BNY to follow) and onchain by Superstate through Bridge. Bridge operates as a FinCEN-registered MSB with US money-transmission licenses, is a registered VASP in Poland, and is transitioning to CASP/EMI in Luxembourg, with a BVI entity for the rest of the world. Native calls this GENIUS-ready.

Value Capture

Native proposes splitting the reserve yield 50/50:

50% immutably to the Assistance Fund through HYPE buybacks.
50% reinvested into USDH growth, funding builder-code frontends, HIP-3 market deployers, and HyperEVM apps.

The design reflects past Hyperliquid revenue splits (e.g. HIP-3 fee share) and aims to compound future contributions to the Assistance Fund.

Liquidity & Market Structure

Native has already tested ERC-20 and HIP-1 token deployments (GALLEON, DBLN, TESTR3) and built the CoreRouter contract, enabling atomic minting on HyperEVM and bridging to HyperCore. Mint and redeem will be programmatic via API, with support for fiat wires and stablecoin swaps. Distribution will be driven through Privy wallets, Stripe cards and ramps, allowing USDH balances to flow directly into consumer payments.

Governance & Risk

By remaining issuer-agnostic, Native avoids dependence on a single regulatory path such as NYDFS, which they argue would slow deployment. Coordinating issuance across multiple jurisdictions adds operational complexity, but it ensures product velocity and flexibility.

Extras / Differentiators

Hyperliquid-first vision: USDH as the native on-ramp, not an add-on product for external stablecoin issuers.
Builder-led team: Founded by Max Fiege, Anish Agnihotri, and MC Lader, with backgrounds spanning DeFi, fintech, and institutional finance.
Technical readiness: CoreRouter contract already audited by Zellic, designed to optimise minting and bridging between HyperEVM and HyperCore.
Commitment: “We’re here to win on product and long-term Hyperliquid alignment, ticker or no ticker.”

Agora

Agora leads a coalition of institutional partners, State Street, VanEck, Rain, and LayerZero, to deliver a GENIUS-ready USDH with 100% of net revenue streamed back to Hyperliquid.

Backing & Compliance

USDH would be issued through Agora’s stablecoin infrastructure, designed for GENIUS compliance and licensed across global jurisdictions. Reserves would be administered by State Street ($49T AUC) and managed by VanEck ($130B AUM), backed by short-dated US Treasuries, overnight repo, and cash. Banks, including Cross River and Customers Bank, would handle liquidity management and fiat settlement.

Value Capture

Agora commits 100% of net revenue from USDH’s reserve assets to Hyperliquid, flowing into the Assistance Fund or HYPE buybacks. More USDH adoption directly scales reserve size and yield, ensuring maximum alignment between growth of the stablecoin and value capture for the network.

Liquidity & Market Structure

USDH will launch as a Hyperliquid-native stablecoin, seeded with at least $10M of liquidity on Day 1. LayerZero interoperability will enable cross-chain minting and liquidity routing from leading chains. Payments adoption will be supported by Rain, giving USDH access to a network of over 2 billion users across 5 continents with native card and fiat on/off ramps. MoonPay expands distribution through wallet integrations and global fiat on/off ramps, while EtherFi contributes consumer-facing cards and vaults.

Governance & Risk

Agora highlights its neutrality: unlike issuers that operate their own chains or brokerages, it does not compete with the Hyperliquid ecosystem. Risks lie in operational execution across multiple partners, but the upside is institutional-grade scale.

Extras / Differentiators

Institutional credibility: Custody and management via State Street and VanEck provide best-in-class financial infrastructure.
Global payments reach: Rain enables USDH acceptance on major card networks and native pay-ins across continents.
Cross-chain operability: LayerZero integration ensures frictionless liquidity movement.
Consumer distribution: EtherFi and partners bring USDH into neobank and retail experiences.
Immediate liquidity: $10M seeded at launch to ensure deep trading pairs.

Sky

Sky offers USDH as a DeFi-native stablecoin with unmatched liquidity, yield above T-bills, and a track record no other issuer can match.

Backing & Compliance

USDH would be implemented as a Sky stablecoin, technically identical to DAI and USDS, backed by a diversified $13B collateral base spanning USDC, tokenised Treasuries, RWAs, and DeFi allocations. Sky has operated continuously for 7+ years without losses, building Lindy through multiple market cycles. While USDH will not be GENIUS compliant at inception, Sky proposes that in future the community can spin it into a dedicated Generator Agent, allowing Hyperliquid governance to choose its own risk management framework and collateral portfolio, including a GENIUS-compliant path.

Value Capture

Hyperliquid receives 4.85% return on all USDH held on Hyperliquid. This combines the Sky Savings Rate (4.75%) with a 10bps Integrator Reward. If sUSDH is enabled, holders can opt to earn the Savings Rate directly, with buybacks adjusted accordingly.

Liquidity & Market Structure

USDH benefits from 2.2B USDC instant redemption through the Peg Stability Module, ensuring deep liquidity for spot and perps. Redemption is accessible across various frontends, including Spark, Sky.money, Defisaver, and CowSwap. USDH can convert natively into sUSDS, one of DeFi’s largest yield-bearing assets. USDH will be multichain from launch via LayerZero, while Sky’s Pioneer system routes yield into new Stars to bootstrap adoption on other chains. Sky can also deploy its multi-billion-dollar collateral portfolio directly on Hyperliquid with a low risk premium.

Governance & Risk

Sky’s risk management follows Basel III–derived frameworks, with real-time monitoring of collateral and junior capital buffers. Sky is the only stablecoin protocol with an S&P credit rating (B– as of August 2025), signalling institutional-level transparency. Risks include a lack of GENIUS status at launch and the complexity of Stars and Generator Agents, though these also provide future flexibility.

Extras / Differentiators

Genesis Star: $25M commitment to seed a Hyperliquid Genesis Star, with tokens farmed exclusively on HL, modelled on Spark and Grove, potentially attracting billions in TVL.
Buyback engine: Sky generates ~$250M in annual profits, with buybacks planned to grow from $36M today to $150M+. Relocating this system to Hyperliquid positions HL as the standard venue for protocol buybacks.
Transparency: Full collateral, risk capital, and yield data visible on info.sky.money.
Commitment: Sky states it will continue building Hyperliquid integrations regardless of the vote, with several initiatives already in development.

Ethena

Ethena pitches USDH as the most Hyperliquid-native option, blending regulatory credibility with a derivatives-driven growth flywheel.

Backing & Compliance

USDH would launch 100% backed by USDtb, issued in partnership with Anchorage Digital Bank (OCC-chartered) and backed indirectly by BlackRock’s BUIDL. USDtb is positioned as GENIUS-compliant.

Value Capture

Ethena commits ≥95% of net reserve yield to Hyperliquid, directed to HYPE buybacks, the Assistance Fund, and validator rewards via KPI milestones. They also pledge to directly cover the transaction costs of redenominating quote pairs from USDC to USDH, ensuring a smooth transition for traders.

Liquidity & Market Structure

Ethena will submit to integrate USDH into USDe’s collateral basket, giving market makers low-fee swap lines into >$5B of stable reserves and tightening spreads on USDH-quoted perps. They propose a Hyperliquid-native fork, hUSDe, which hedges on HIP-3 markets and sustains short open interest. A $75–150m incentive pool is earmarked for HIP-3 deployers and front-ends like Based, where Ethena has invested directly.

Governance & Risk

A validator guardian model gives elected validators shared powers to freeze or reissue USDH in tail-risk scenarios, explicitly addressing systemic risk. The design strikes a balance between institutional custody and onchain oversight.

Extras / Differentiators

Ethena frames itself not just as an issuer but as a strategic partner:

Prime brokerage angle: Ethena’s balance sheet can serve as a natural counterparty for HL equity perps and collateralised borrowing, expanding fee pools.
RWA rails: Commitments with Securitize and Anchorage to deploy tokenised funds and native USDtb on HyperEVM, pulling traditional assets into HL infra.
Optionality: The community can later vote to diversify backing into USDe or sUSDe, potentially unlocking $698m–$990m in annual yield at a $5.5B supply.

Bastion

Bastion positions itself as the most regulated and neutral option. A GENIUS-compliant issuer under a New York Trust Charter that provides full-stack issuance without conflicts of interest.

Backing & Compliance

USDH would be issued as a full-stack stablecoin, not a wrapper, with its own legally segregated, bankruptcy-remote reserves. Bastion operates through Dibbs Trust, a NYDFS-supervised Limited Purpose Trust Company, alongside dozens of money transmitter licenses and FinCEN MSB registration. The reserves would include cash, short-duration Treasuries, and tokenised Money Market Funds (MMFs) such as BlackRock’s BUIDL (via Securitize) and WisdomTree’s short-term fund. Bastion stresses that NYDFS’s framework closely maps to GENIUS requirements, making USDH GENIUS-compliant from day one.

Value Capture
Bastion allocates 95% of reserve interest to ecosystem growth:

50% to the Assistance Fund.
40% to builder incentives, liquidity providers, and traders.
5% reinvested into USDH and HYPE growth (liquidity seeding, listings, adoption partnerships).

This framework is designed to be flexible, allowing the community to evolve allocations as USDH scales.

Liquidity & Market Structure

USDH would be globally accessible through Bastion and partner on/off ramps with support for ACH, wire, and SWIFT. Partnerships with Rain, LayerZero, and Borderless extend card support and cross-chain interoperability. Early liquidity bootstrapping includes covering costs for USDC→USDH redemptions at scale. Over time, the focus shifts toward adoption across trading, payments, and integrations.

Governance & Risk

Bastion emphasises its neutrality: it does not issue its own stablecoin, operate a chain, or run an exchange. NYDFS oversight provides a high bar of regulatory assurance, but issuance of new stablecoins still requires regulatory review, which can take months.

Extras / Differentiators

Institutional pedigree: Team includes senior alumni from Anchorage, a16z, Meta Libra, Kraken, DOJ, Goldman Sachs, Ripple, Cash App, Coinbase, and Paxos.
Transparency: Bastion calls on validators to ask all issuers: what charter do you hold, and are you GENIUS-compliant today? They argue that money transmitter licenses alone are insufficient.

OpenEden

OpenEden proposes USDH as an institutional-grade stablecoin, anchored in independently rated reserves, Tier-1 custody, and global TradFi integrations.

Backing & Compliance

USDH would be issued via OpenEden Digital, a wholly owned subsidiary licensed by the Bermuda Monetary Authority under a Class M Digital Asset Business License. Reserves are held in a bankruptcy-remote segregated accounts company (SAC) structure, insulating holders from issuer liabilities. USDH would be backed by TBILL, a tokenised US Treasury fund managed and custodied by BNY Mellon. TBILL carries dual independent ratings, A from Moody’s and AA+f/S1+ from S&P, one of only three tokenised MMFs globally with this distinction.

Value Capture

Underlying yield (~4%): 100% directed to HYPE buybacks and Hyperliquid ecosystem initiatives.
Minting and redemption fees: 100% allocated to HYPE buybacks and validator rewards.
Strategic incentives: 3% of the $EDEN token supply earmarked for USDH adoption on Hyperliquid, with scope for future increases.

Liquidity & Market Structure

Users can mint and redeem USDH directly in fiat via US banking partners or in USDC. BNY Mellon provides custody, investment management, and redemption liquidity. Chainlink supports USDH with high-quality Data Feeds for pricing, Proof of Reserve for onchain collateral verification, and CCIP interoperability for cross-chain transfers. Monarq Asset Management (majority-owned by FalconX) will serve as a dedicated liquidity provider. AEON Pay extends USDH’s utility to 20M+ merchants across Southeast Asia, Mexico, and Nigeria, demonstrating real-world payments adoption already tested with OpenEden’s USDO/cUSDO.

Governance & Risk

Regulatory oversight is provided by the Bermuda Monetary Authority, with the SAC model ensuring reserves remain segregated and bankruptcy-remote. While this structure offers strong protection, it differs from a US-chartered GENIUS pathway, which may be seen as a tradeoff by validators prioritising US licensing.

Extras / Differentiators

Institutional-grade reserves: TBILL is one of the longest-running tokenised MMFs with dual independent ratings.
Tier-1 custodian: BNY Mellon, with $55T in AUC, manages reserves and ensures redemption liquidity.
Onchain transparency: Chainlink PoR provides verifiable collateralisation.
Global payments reach: AEON Pay brings USDH utility to 20M+ merchants, with expansion plans for Africa and Latin America.
Liquidity depth: Monarq and FalconX backstop liquidity with institutional scale.

Conclusion

Stablecoins are the foundation of liquidity, and Hyperliquid’s choice of USDH issuer will shape its economics, user experience, and credibility for years to come. Today, more than 95% of Hyperliquid’s $5.8B stablecoin base sits in USDC, exporting over $230M in annual yield to external issuers. USDH is the chance to bring that value home.

Every proposal offers a different path, ranging from highly regulated issuers like Paxos, Bastion, and OpenEden, to DeFi incumbents such as Frax and Sky, to Hyperliquid-first builders like Native Markets and Ethena, to coalitions like Agora. Each has strengths, tradeoffs, and implications for how USDH will scale.

At the heart of it all is the USDH flywheel:

USDH adoption grows, leading to balances and trading pairs migrating into USDH.
More reserves generate more yield, which in turn flows back to Hyperliquid.
Yield is reinvested into buybacks, incentives, and liquidity, deepening markets and making USDH more attractive, which in turn drives further USDH dominance.

The issuer that can most effectively ignite and sustain this cycle will turn USDH into a self-reinforcing engine of growth for the entire Hyperliquid ecosystem.

The upcoming validator vote decides more than who gets the ticker. It sets the foundation for whether Hyperliquid continues leaking value to external issuers or captures it, reinvests it, and compounds it into long-term dominance.

USDH: A Hyperliquid Aligned Stablecoin