Hyperliquid Exchange has initiated an open bidding process for the issuance rights of its USDH stablecoin, breaking the traditional monopoly held by Tether and Circle. Institutions like Paxos and Frax Finance are competing with distinct proposals:

• Paxos advocates for a compliance-focused approach, pledging to use 95% of interest income to repurchase Hyperliquid’s native token HYPE and leveraging its traditional finance resources to drive ecosystem growth.

• Frax Finance proposes a DeFi-native solution, promising 100% profit returns to users with zero fees, emphasizing decentralization and community governance.

• Other bidders, such as Agora, have put forward neutral alliance or localized models.

This move could trigger a paradigm shift in the industry, prompting leading DeFi protocols to leverage their liquidity advantages and demand profit-sharing from stablecoin issuers. The stablecoin market may gradually transition from a "universal currency" model to an "ecosystem-bound" one, accelerating the decentralization of power structures.

Summary

Author: BlockWeeks

In the crypto world, the stablecoin business has always been the closest thing to "printing money." Circle and Tether have functioned as the dual central banks of this digital economy, sitting on hundreds of billions in real-world assets (primarily U.S. Treasuries) while enjoying hefty interest from Fed rate hikes and providing foundational liquidity for the on-chain world. No matter how high their trading volumes or how vibrant their ecosystems, flashy DeFi protocols have essentially been downstream pipelines for these "central banks"—their "super users."

This seemingly unshakable power structure has now been disrupted by Hyperliquid, a dark horse in the derivatives sector, in an almost "brutal" manner. Instead of quietly forking a new stablecoin or settling for a superficial partnership with an issuer, Hyperliquid publicly auctioned off the "issuance rights" for its stablecoin—a privilege once considered the exclusive domain of giants. This move is like throwing a boulder into the calm waters of the stablecoin market, not only sparking fierce competition among heavyweights like Paxos and Frax Finance but also signaling a profound transformation in the power dynamics and business models of the stablecoin industry.

An Unprecedented "Talent Show": The Battle for USDH Issuance Rights
As a leading decentralized exchange with daily trading volumes often reaching billions of dollars, Hyperliquid holds vast stablecoin assets (primarily USDC) on its platform. The reserve interest from these assets represents substantial revenue, but it has historically been controlled by external issuers like Circle.

Hyperliquid decided to reclaim this value for its ecosystem. It retained the USDH ticker and issued an open call to the market: Whoever could provide the best stablecoin solution for the Hyperliquid ecosystem would win the exclusive rights to issue USDH. This was not just a technical selection but a transparent business negotiation, with all bidders’ proposals, commitments, and profit-sharing models subject to community and validator scrutiny.

This "talent show" attracted top-tier players, whose proposals fell into two distinct camps, representing divergent paths for the future of stablecoins:

1. The Compliance and Traditional Titan: Paxos’s "Empower HYPE" Model
As a well-established, regulatorily approved stablecoin issuer (behind BUSD and USDP), Paxos’s proposal emphasizes "compliance" and "ecosystem feedback." Its core promises include:

• Regulatory Certainty: USDH will fully comply with the U.S. Stablecoin Innovation Act (GENIUS) and the EU’s MiCA regulations, paving the way for institutional and mass adoption.

• Massive Buybacks: 95% of the interest generated by USDH’s reserve assets will be used to repurchase Hyperliquid’s native token HYPE on the secondary market and distribute it to ecosystem contributors. Estimates suggest this could generate nearly $2 billion in annual buy pressure for HYPE.

• Resource Integration: Leveraging its deep connections in traditional finance channels like PayPal, Venmo, and Interactive Brokers to promote HYPE integration and push Hyperliquid from "crypto-native" into the mainstream market.

Paxos’s proposal is undoubtedly a "sincere" partnership agreement, sacrificing some profits to secure a central role in Hyperliquid’s emerging financial ecosystem and deeply tying stablecoin yields to the platform token’s value.

2. The DeFi Native Disruptor: Frax Finance’s "Zero Fee" Declaration
In contrast to Paxos’s稳健 approach, Frax Finance, a pioneer in DeFi innovation, proposed a more radical and "crypto-native" solution. Its highlights include:

• Full Decentralization and Profit Returns: Frax承诺 to programmatically return 100% of the yield from underlying assets like U.S. Treasuries directly to Hyperliquid users and the ecosystem via its FraxNet protocol, with zero fees taken by Frax itself.

• DeFi Lego Integration: USDH will be pegged 1:1 to Frax’s decentralized stablecoin frxUSD and deeply integrated with Frax’s DeFi product suite, enabling richer on-chain use cases and composability for USDH.

• Community Ownership: The proposal emphasizes that USDH will be a fully community-owned stablecoin, with value capture and profit distribution governed by Hyperliquid’s community.

Frax’s proposal embodies a purer Web3 ethos of "value returning to users," attempting to transform stablecoins from profit tools controlled by centralized entities into public infrastructure serving decentralized ecosystems.

3. Neutral Alliances and Newcomers: Agora and Native Markets
Beyond the two frontrunners, Agora, backed by Wall Street giant VanEck’s subsidiary, also joined the race. It collaborated with multiple infrastructure providers to propose a "neutral alliance" model, promising to return 100% of net income to the Hyperliquid ecosystem and emphasizing its role as a neutral issuer without conflicts of interest. Additionally, Native Markets, a native team within the Hyperliquid ecosystem, submitted a proposal. Though details are scarce, its "localized" approach has garnered some community attention.

The Novelty and Far-Reaching Impact of the USDH Competition
The true significance of this bidding war lies in the new playbook it provides for all top-tier DeFi protocols.

In the past, protocols silently endured Circle’s "mint/redeem fees" and its indifference to their revenue. Now, Hyperliquid is openly challenging others: Hey, Solana! Hey, EigenLayer! You’re sitting on tens of billions in USDC, generating astronomical interest income for Circle every year. Are you just going to take it?

This opens a Pandora’s box of "protocol rent-seeking." In the future, we may see more leading protocols leveraging their "asset gravity" to demand profit-sharing, value infusion, and customized services from stablecoin issuers. The role of stablecoin issuers will shift from lofty "central banks" to competing "commercial banks," forced to innovate and undercut each other to secure major clients (top protocols).

Ultimately, the fire ignited by Hyperliquid will burn down the old, oligopolistic stablecoin issuance system. It will compel stablecoin profits to flow back from issuers’ balance sheets to the DeFi ecosystems that truly create value.

The Future of Stablecoins: From "Universal Currency" to "Ecosystem Dollars"
The story of Hyperliquid and USDH may be a microcosm of the evolution of the stablecoin market. As the crypto ecosystem matures, we will see more "ecosystem-native" or "platform-customized" stablecoins emerge. These will no longer merely aim to be generic, indistinguishable "digital dollars" but will instead be deeply integrated with specific ecosystems, their mechanisms and profit distributions designed to serve the long-term development of those ecosystems.

The game of thrones for stablecoin power sparked by Hyperliquid has only just begun. Regardless of which bidder ultimately wins, the birth of USDH has already successfully stirred the waters. It forces us to rethink the nature of stablecoins, the ownership of value, and the relationship between platforms and infrastructure. For Tether and Circle, a new era of platform-led, profit-sharing may be on the horizon.

The old power structure is crumbling, and the new rules are being written by every participant in this fierce competition. This may be one of the most exciting narratives in our industry since DeFi Summer.

Hyperliquid Exchange has initiated an open bidding process for the issuance rights of its USDH stablecoin, breaking the traditional monopoly held by Tether and Circle. Institutions like Paxos and Frax Finance are competing with distinct proposals:

• Paxos advocates for a compliance-focused approach, pledging to use 95% of interest income to repurchase Hyperliquid’s native token HYPE and leveraging its traditional finance resources to drive ecosystem growth.

• Frax Finance proposes a DeFi-native solution, promising 100% profit returns to users with zero fees, emphasizing decentralization and community governance.

• Other bidders, such as Agora, have put forward neutral alliance or localized models.

This move could trigger a paradigm shift in the industry, prompting leading DeFi protocols to leverage their liquidity advantages and demand profit-sharing from stablecoin issuers. The stablecoin market may gradually transition from a "universal currency" model to an "ecosystem-bound" one, accelerating the decentralization of power structures.

Summary

Author: BlockWeeks

In the crypto world, the stablecoin business has always been the closest thing to "printing money." Circle and Tether have functioned as the dual central banks of this digital economy, sitting on hundreds of billions in real-world assets (primarily U.S. Treasuries) while enjoying hefty interest from Fed rate hikes and providing foundational liquidity for the on-chain world. No matter how high their trading volumes or how vibrant their ecosystems, flashy DeFi protocols have essentially been downstream pipelines for these "central banks"—their "super users."

This seemingly unshakable power structure has now been disrupted by Hyperliquid, a dark horse in the derivatives sector, in an almost "brutal" manner. Instead of quietly forking a new stablecoin or settling for a superficial partnership with an issuer, Hyperliquid publicly auctioned off the "issuance rights" for its stablecoin—a privilege once considered the exclusive domain of giants. This move is like throwing a boulder into the calm waters of the stablecoin market, not only sparking fierce competition among heavyweights like Paxos and Frax Finance but also signaling a profound transformation in the power dynamics and business models of the stablecoin industry.

An Unprecedented "Talent Show": The Battle for USDH Issuance Rights
As a leading decentralized exchange with daily trading volumes often reaching billions of dollars, Hyperliquid holds vast stablecoin assets (primarily USDC) on its platform. The reserve interest from these assets represents substantial revenue, but it has historically been controlled by external issuers like Circle.

Hyperliquid decided to reclaim this value for its ecosystem. It retained the USDH ticker and issued an open call to the market: Whoever could provide the best stablecoin solution for the Hyperliquid ecosystem would win the exclusive rights to issue USDH. This was not just a technical selection but a transparent business negotiation, with all bidders’ proposals, commitments, and profit-sharing models subject to community and validator scrutiny.

This "talent show" attracted top-tier players, whose proposals fell into two distinct camps, representing divergent paths for the future of stablecoins:

1. The Compliance and Traditional Titan: Paxos’s "Empower HYPE" Model
As a well-established, regulatorily approved stablecoin issuer (behind BUSD and USDP), Paxos’s proposal emphasizes "compliance" and "ecosystem feedback." Its core promises include:

• Regulatory Certainty: USDH will fully comply with the U.S. Stablecoin Innovation Act (GENIUS) and the EU’s MiCA regulations, paving the way for institutional and mass adoption.

• Massive Buybacks: 95% of the interest generated by USDH’s reserve assets will be used to repurchase Hyperliquid’s native token HYPE on the secondary market and distribute it to ecosystem contributors. Estimates suggest this could generate nearly $2 billion in annual buy pressure for HYPE.

• Resource Integration: Leveraging its deep connections in traditional finance channels like PayPal, Venmo, and Interactive Brokers to promote HYPE integration and push Hyperliquid from "crypto-native" into the mainstream market.

Paxos’s proposal is undoubtedly a "sincere" partnership agreement, sacrificing some profits to secure a central role in Hyperliquid’s emerging financial ecosystem and deeply tying stablecoin yields to the platform token’s value.

2. The DeFi Native Disruptor: Frax Finance’s "Zero Fee" Declaration
In contrast to Paxos’s稳健 approach, Frax Finance, a pioneer in DeFi innovation, proposed a more radical and "crypto-native" solution. Its highlights include:

• Full Decentralization and Profit Returns: Frax承诺 to programmatically return 100% of the yield from underlying assets like U.S. Treasuries directly to Hyperliquid users and the ecosystem via its FraxNet protocol, with zero fees taken by Frax itself.

• DeFi Lego Integration: USDH will be pegged 1:1 to Frax’s decentralized stablecoin frxUSD and deeply integrated with Frax’s DeFi product suite, enabling richer on-chain use cases and composability for USDH.

• Community Ownership: The proposal emphasizes that USDH will be a fully community-owned stablecoin, with value capture and profit distribution governed by Hyperliquid’s community.

Frax’s proposal embodies a purer Web3 ethos of "value returning to users," attempting to transform stablecoins from profit tools controlled by centralized entities into public infrastructure serving decentralized ecosystems.

3. Neutral Alliances and Newcomers: Agora and Native Markets
Beyond the two frontrunners, Agora, backed by Wall Street giant VanEck’s subsidiary, also joined the race. It collaborated with multiple infrastructure providers to propose a "neutral alliance" model, promising to return 100% of net income to the Hyperliquid ecosystem and emphasizing its role as a neutral issuer without conflicts of interest. Additionally, Native Markets, a native team within the Hyperliquid ecosystem, submitted a proposal. Though details are scarce, its "localized" approach has garnered some community attention.

The Novelty and Far-Reaching Impact of the USDH Competition
The true significance of this bidding war lies in the new playbook it provides for all top-tier DeFi protocols.

In the past, protocols silently endured Circle’s "mint/redeem fees" and its indifference to their revenue. Now, Hyperliquid is openly challenging others: Hey, Solana! Hey, EigenLayer! You’re sitting on tens of billions in USDC, generating astronomical interest income for Circle every year. Are you just going to take it?

This opens a Pandora’s box of "protocol rent-seeking." In the future, we may see more leading protocols leveraging their "asset gravity" to demand profit-sharing, value infusion, and customized services from stablecoin issuers. The role of stablecoin issuers will shift from lofty "central banks" to competing "commercial banks," forced to innovate and undercut each other to secure major clients (top protocols).

Ultimately, the fire ignited by Hyperliquid will burn down the old, oligopolistic stablecoin issuance system. It will compel stablecoin profits to flow back from issuers’ balance sheets to the DeFi ecosystems that truly create value.

The Future of Stablecoins: From "Universal Currency" to "Ecosystem Dollars"
The story of Hyperliquid and USDH may be a microcosm of the evolution of the stablecoin market. As the crypto ecosystem matures, we will see more "ecosystem-native" or "platform-customized" stablecoins emerge. These will no longer merely aim to be generic, indistinguishable "digital dollars" but will instead be deeply integrated with specific ecosystems, their mechanisms and profit distributions designed to serve the long-term development of those ecosystems.

The game of thrones for stablecoin power sparked by Hyperliquid has only just begun. Regardless of which bidder ultimately wins, the birth of USDH has already successfully stirred the waters. It forces us to rethink the nature of stablecoins, the ownership of value, and the relationship between platforms and infrastructure. For Tether and Circle, a new era of platform-led, profit-sharing may be on the horizon.

The old power structure is crumbling, and the new rules are being written by every participant in this fierce competition. This may be one of the most exciting narratives in our industry since DeFi Summer.