- Ethena Labs withdrew its USDH stablecoin proposal following concerns over being a non-native project.
- Native Markets now leads the race, with Polymarket odds showing a 92% chance of success.
- Critics continue to raise concerns about fairness and transparency in Hyperliquid’s first major governance vote.
Ethena Labs, the team behind the USDe synthetic dollar, has officially pulled out of the contest to issue Hyperliquid’s USDH stablecoin. The decision followed conversations with validators and community members who voiced concerns about Ethena Labs not being “Hyperliquid-native.”
In a statement shared on X, the company acknowledged the criticisms and said it would step aside, congratulating rival bidder Native Markets, which has quickly become the frontrunner. The withdrawal is a significant shift in the race, underscoring how deeply the Hyperliquid community values alignment with its ecosystem principles.
Native Markets Emerges as Frontrunner Amid Ethena Labs Exit
Prediction markets now give Native Markets a commanding 92% chance of winning the mandate, with Paxos trailing at just 7%. Ethena Labs exit effectively clears the path, though not without sparking heated discussions. Some industry figures argue that the process itself seemed tilted in favor of Native Markets from the outset.
Haseeb Qureshi, managing partner at Dragonfly, voiced skepticism about the fairness of the competition, pointing out that Native Markets appeared unusually well-prepared, submitting its proposal almost immediately after the request was published. This has led to speculation that the team may have had advance notice, while established players such as Paxos and Ethena scrambled to prepare detailed proposals.
Governance Vote on USDH Highlights the Importance of Validator and Community Power in Hyperliquid’s System
The USDH stablecoin vote is Hyperliquid’s first governance test beyond routine asset-related decisions, and it is already drawing scrutiny. Voting is carried out entirely on-chain, with validator influence determined by the size of their HYPE token stakes. To pass, a proposal needs two-thirds of the total voting power.
Importantly, two key players — the Hyperliquid Foundation and liquid staking provider Kinetiq — control about 63% of the staked supply but have pledged to abstain, leaving room for the community and smaller validators to shape the outcome.
The process is tightly scheduled: validators had only 24 hours to declare their positions after submissions closed, followed by a brief redelegation period. The final vote is slated for Sunday morning between 10:00 and 11:00 UTC.
Native Markets Positions Itself as Hyperliquid’s Homegrown Solution for Stablecoin Issuance
Native Markets, though a new entrant, is led by well-known figures, including Hyperliquid investor Max Fiege, ex-Uniswap Labs COO MC Lader, and researcher Anish Agnihotri. Hyperliquid’s proposal emphasizes building directly on HyperEVM, committing to recycle revenue into the ecosystem and pledging that half of the stablecoin’s reserve interest would go into HYPE token buybacks.
The other half, they say, will be directed toward ecosystem growth and development of apps within Hyperliquid. This positioning as a Hyperliquid-native player has resonated strongly with validators and delegators, even as doubts linger over the group’s limited operational track record.
Broader Implications for Hyperliquid’s Growth as USDH Prepares to Join the Ecosystem
The race for USDH carries weight far beyond governance politics. Hyperliquid has been expanding its ecosystem rapidly, with over $5.3 billion in inflows through USDC, which currently serves as its main liquidity source. However, USDC’s freezable nature contradicts Hyperliquid’s vision of a censorship-resistant system, fueling urgency for a native stablecoin. Hyperliquid has reserved the USDH ticker and shared through its Discord that the new stablecoin will be embedded directly into the chain.
Meanwhile, for backers like VanEck’s CEO, who publicly confirmed holding HYPE tokens and voiced support for Hyperliquid’s governance model, the stablecoin push could mark a turning point. If successful, USDH might become one of the primary liquidity instruments in Hyperliquid’s trading environment.
