By Paul | Shoal

Compiled by: TechFlow

With @HyperliquidX planning to launch USDH, we're already seeing major competitors vying for issuance rights, even pledging up to 100% of reserve interest and revenue back to the Hyperliquid community.

A quick recap for those who aren't familiar:

• Stablecoins are at the core of Hyperliquid’s business model, just like any perpetual swap exchange.
• The current total supply of stablecoins on HyperEVM is approximately $5.72 billion, of which approximately 95% is USDC. In other words, approximately 95% of the stablecoin supply on Hyperliquid is currently freezeable.
• It is clear that this situation is neither sustainable nor desirable for Hyperliquid. The need to launch a Hyperliquid native stablecoin has been discussed for some time.
• Interestingly, Hyperliquid is now letting its token holders vote on who will be the native issuer of USDH.

@Paxos

• USDH is issued in a fully compliant manner, in line with GENIUS/MiCA standards, with global banking channels and fiat currency deposit/withdrawal functions.
• 95% of USDH reserve interest will be allocated for HYPE repurchase.
• Interestingly, @paxoslabs recently acquired Molecular Labs, the team behind LHYPE and WHLP.

@Frax

• Issue USDH, pegged 1:1 to frxUSD (frxUSD itself is backed by tokenized US Treasuries).
• 100% of the USDH reserve income will be fed back to Hyperliquid, and Frax will not take any commission at all.
• USDH will support multiple chains (any chain where frxUSD exists) out of the box, while still maintaining HyperEVM native properties.

@fiege_max

• Issue the globally compliant stablecoin USDH through cross-chain from day one.
• Allocate a “meaningful share” of reserve earnings to the aid fund.
• Mint USDH directly on HyperEVM and enable HyperCore transfers on day one.

@withAUSD

• USDH is issued through cross-chain, equipped with a globally compliant deposit/withdrawal infrastructure.
• 100% of the net income from USDH treasury assets will be allocated to the aid fund or used to repurchase HYPE.
• Leveraging a coalition of partners to minimize centralized dependencies (including agora, @raincards, @LayerZero_Core, and @vaneck_us).

Some thoughts

• Revenue share is important (very important!), but I don't think it's going to make or break a deal. We've seen most bidders offer high revenue share for HYPE buybacks. Small differences (like 5-10%) won't really change the dynamics (e.g., Ethena's 100% vs. Paxos's 95%).
• Compliance does provide a better fiat currency deposit/withdrawal experience, but it also brings potential freezing risks.
• Multi-chain distribution should be a key focus, especially USDH should be easily accessible from other chains, minimizing the use of middleware or intermediary contracts. However, I don’t think this alone is enough to change the situation.

I've seen many people suggesting @ethena_labs or at least curious about their bid. This could be a good opportunity for Ethena to surpass Circle. However, I doubt the Hyperliquid community will embrace Ethena; the competitive relationship and potential conflicts between the two parties make the situation too complicated. That said, I wouldn't be surprised if they participate.

I can also imagine @M0, @paypal, and @SkyEcosystem bidding. Also, I agree with @jon_charb; no one is talking about the possibility of Circle itself bidding, but it's certainly worth keeping an eye on.

On the other hand, some have suggested blacklisting the USDH code and having the foundation develop an in-house stablecoin. This is also an interesting direction. However, I don't think the Hyperliquid Foundation is interested in building a stablecoin from scratch.

Anyway, the proposal deadline is September 10th, and I expect we'll see one or two more strong proposals. I'm just here to watch and enjoy the competition. Regardless of who ultimately wins, the quality of the bidders will speak for themselves.

May the best bidder prevail, Hyperliquid.