Ethena Labs has recently put forward a proposal on September 9th to become the issuer of Hyperliquid’s native stablecoin, USDH. This move comes as part of a competitive selection process to introduce a new stablecoin on the decentralized exchange, aiming to rival the existing $5.5 billion in USDC deposits.
The proposal from Ethena involves backing USDH entirely with USDtb, a stablecoin supported by BlackRock’s BUIDL fund and Anchorage Digital. Ethena has pledged to return 95% of the net revenue generated from USDH reserves back to the Hyperliquid community through HYPE token purchases and ecosystem development.
One key aspect of Ethena’s proposal is the establishment of an elected guardian network of Hyperliquid validators to oversee USDH operations. This decentralized approach aims to remove single-issuer control over the stablecoin’s security management.
In addition to launching USDH, Ethena has plans to introduce hUSDe, a Hyperliquid-native variant of its synthetic dollar product. The company has also committed $75 million in incentives to support the development of HIP-3 markets.
Ethena’s proposal faces competition from other contenders, each offering their unique approaches to backing and governance of USDH. Paxos suggests backing the stablecoin through New York Department of Financial Services-protected accounts with monthly KPMG attestations. Frax Finance plans to back frUSD through treasury partnerships with BlackRock and Superstate, while Agora offers short-dated US Treasuries with proof of reserves powered by Chaos Labs. Sky proposes flexible collateral backing with LayerZero interoperability.
The selection process for the issuer of USDH involves community governance approval of proposals before proceeding to a gas auction for final deployment rights. The transition to a new issuer could potentially generate $220 million in additional annualized revenue for HYPE holders, according to estimates from Omar Kanji of Dragonfly.
Ethena highlights its experience in managing over $23 billion in tokenized dollar assets and positions itself as the largest counterparty capable of supporting Hyperliquid’s expansion into equity perpetual swaps through HIP-3 markets.
Overall, the competition for the issuer of USDH on Hyperliquid’s platform is heating up, with each proposal offering unique strengths and approaches to backing and governance. It remains to be seen which proposal will ultimately be chosen to lead the way in this evolving landscape of decentralized finance.