Hyperliquid's USDH Seeks to Reallocate $220 Million Each Year, Posing a Challenge to USDC's Leading Position in DeFi

Hyperliquid introduced its USDH stablecoin on September 23, 2025, after a competitive governance process that resulted in Native Markets being chosen as the issuer. Pegged to the U.S. dollar at a 1:1 ratio, USDH debuted on Hyperliquid’s platform with an opening trading volume of $2.2 million. Native Markets won the right to issue USDH following a heated bidding war among six prominent contenders, including Paxos, Sky (previously MakerDAO), Frax Finance, and

Labs. The governance vote, conducted on September 14, saw Native Markets secure more than two-thirds of validator support, despite concerns that the process may have favored the newcomer over more established firms.

USDH is intended to lessen Hyperliquid’s dependence on third-party stablecoins such as

, which currently make up 95% of the platform’s $5.6 billion in stablecoin holdings. By capturing the Treasury yield from these reserves, Hyperliquid aims to redirect roughly $220 million per year back into its own ecosystem. Native Markets’ proposal detailed a reserve system supported by cash and U.S. Treasury assets, managed using Stripe’s Bridge and BlackRock’s BUIDL tokenization fund. The issuer pledged to allocate half of the reserve yields to Hyperliquid’s Assistance Fund, with the rest dedicated to developing the USDH ecosystem.

The introduction of USDH signals a strategic evolution in decentralized finance, as platforms increasingly look to internalize stablecoin revenues. Native Markets is rolling out USDH in phases, initially limiting individual transactions to $800 while core features are tested. Planned future upgrades include using USDH for spot trading settlements, enabling native minting on HyperCore, and supporting perpetual contracts denominated in USDH. During its initial trading period, USDH maintained its peg, with only slight movement to $1.001 as users explored its liquidity features.

Industry experts have noted that USDH could significantly impact the stablecoin sector. Unlike USDC or

, which focus on cross-chain compatibility, USDH is tailored for the Hyperliquid ecosystem, offering substantially lower trading fees (an 80% reduction for USDH pairs) and direct value accrual via HYPE token buybacks. Nonetheless, there are hurdles ahead, such as meeting regulatory requirements under the GENIUS Act and MiCA, and ensuring enough liquidity to support Hyperliquid’s large trading volumes.

The contest for USDH issuance highlighted broader shifts in DeFi governance. Although Native Markets emerged as the winner, some questioned whether the process was equitable, pointing out that larger organizations like Paxos and Ethena had put forward more comprehensive proposals. Polymarket odds showed Native Markets leading with 56-74%, while Paxos and Ethena lagged at 35% and 10%. Despite the debate, USDH’s launch marks a major milestone in Hyperliquid’s efforts to capture yield and reduce reliance on external stablecoins, positioning it as a potential rival to leading stablecoins in the DeFi arena.