Ethena exits Hyperliquid USDH race, clearing path for Native Markets

Ethena, the team behind the USDe synthetic dollar protocol, withdrew its bid to issue Hyperliquid’s USDH stablecoin, conceding to concerns raised in direct discussions with community members and validators. 

In a X statement Thursday, the Ethena team acknowledged pushback over not being a Hyperliquid-native project and  said  it would step aside, congratulating rival Native Markets, now viewed as the frontrunner in the race.

“While some are complaining about their [Native Markets] lack of credibility I think their success here perfectly embodies everything which is so special about Hyperliquid and their community,”  wrote  Ethena Labs founder Guy Young, adding:

“It is a level playing field where emergent players can win the hearts of the community and are given a fair shot at succeeding.”

Ethena’s withdrawal marks a major shift in the bidding process, which has drawn proposals from multiple teams to issue USDH, Hyperliquid’s forthcoming native stablecoin. 

With Ethena out, prediction markets on Polymarket are giving Native Markets a 92% chance of winning, with Paxos in second place at roughly 7% at time of writing.

  Polymarket's traders now give Native Markets a 92% win. Source: Polymarket

Critics question the fairness of the USDH bidding process

Not everyone agrees with Ethena’s assessment that the bidding was a level playing field. Critics have questioned Native Markets’ limited track record and even the fairness of the process itself. 

Haseeb Qureshi, managing partner at crypto venture firm Dragonfly,  wrote  on Tuesday that he was “starting to feel like the USDH RFP was a bit of a farce,” claiming validators appeared unwilling to seriously consider any team besides Native Markets.

He added that Native Markets’ bid appeared almost immediately after the Request for Proposals was announced, “implying they had advanced notice,” while other bidders scrambled to prepare submissions. He said the process seemed “custom made for Native Markets,” despite stronger proposals from more established  players like Paxos , Ethena and  Agora .

  Source: Haseeb Qureshi

Lilian Aliaga, chief operating officer and co-founder of OAK Research, questioned how Native Markets had already secured more than 70% of committed votes. “With all due respect, I just don’t see how they can turn USDH into a multi-billion stablecoin,” he  wrote  on X, adding that the outcome suggested “bias is at play.”

Others have a different perspective. Sam MacPherson, CEO and co-founder of Phoenix Labs and a core contributor to Spark, told Cointelegraph that “…it is entirely possible that Native Markets is the best fit. However, in terms of fiat-backed stablecoin issuers, Paxos is the industry leader in the space having issued USDP, PYUSD, USDG, and others.”

Whoever emerges victorious, the outcome will carry significant weight for Hyperliquid and the broader stablecoin market.

“The stakes are high: roughly $5 billion of USDC sits on Hyperliquid, which, on a back-of-the-envelope calculation, implies about 10% of Circle’s business (or about $200 million in annual revenue) comes from this,” said David Lawant, head of research at FalconX.

How the USDH vote works

The USDH vote is Hyperliquid’s first major governance decision beyond routine asset de-listings. Voting occurs entirely onchain, with validator power determined by the amount of HYPE tokens staked. A proposal must clear a two-thirds majority of the total stake to pass.

After validators signal their intentions, delegators can redelegate HYPE to validators aligned with their preferences.

Two players could have dominated the outcome — the Hyperliquid Foundation and liquid staking provider Kinetiq, which together control about 63% of total stake — but both have pledged to  abstain .

The timeline is tight. Proposals closed on Wednesday, with validators given 24 hours to declare support, followed by a short redelegation window. The final vote will be held Sunday between 10:00 and 11:00 UTC. 

Native Markets’ plans for USDH

Native Markets is a new organization created to compete for the mandate to issue Hyperliquid’s first native stablecoin, USDH. The group is led by Max Fiege, a Hyperliquid investor and adviser, alongside MC Lader, former president and chief operating officer of Uniswap Labs, and Anish Agnihotri, a blockchain researcher and ex-Paradigm contributor.

The company’s  proposal  positions it as the most “Hyperliquid-native” option, pledging to mint USDH on HyperEVM and recharge revenue into the ecosystem.

Half of the interest generated from USDH reserves would go to HYPE buybacks through the Assistance Fund, with the other half dedicated to ecosystem growth, including HIP-3 markets and HyperEVM apps.

  Source: Max Fiege

USDH would be backed by cash and short-duration US Treasurys, with offchain reserves initially managed by BlackRock and onchain reserves overseen by Superstate through  Stripe-owned Bridge . 

That reliance on Bridge has drawn some criticism, with some  saying  it could create a single point of failure.

Nick VanEck, founder of Agora, has questioned whether Stripe’s broader ambitions  could conflict with Hyperliquid . “If Hyperliquid relinquishes its canonical  stablecoin  to Stripe, a vertically integrated issuer with clear conflicts, what are we all even doing?”

Fiege has acknowledged the scrutiny:  “We know we’re a new team and don’t take the burden to prove ourselves lightly,” he  wrote  on X Thursday.