Disrupting the Stablecoin Landscape? An “Unprecedented” Auction Attracts the Entire Crypto Community’s Attention
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An unprecedented bidding war over the right to issue stablecoins is rewriting the power dynamics in the cryptocurrency market.
On September 5, the decentralized exchange Hyperliquid put the issuance rights of its native stablecoin USDH up for public auction, attracting fierce competition from ten major institutions including Ethena Labs, Paxos, Frax Finance, and Sky Ecosystem, all vying for an annual revenue stream of up to $220 million.
This bidding, decided by validator votes, represents an unprecedented democratization of stablecoin choice. As a leading decentralized derivatives trading platform with daily trading volumes in the billions of dollars, Hyperliquid aims to reduce dependence on external stablecoins like USDC and redirect value such as treasury yields back into its own ecosystem.
The proposals from each bidder vary significantly, ranging from fiat collateral to decentralized collateralized debt positions. Ethena Labs promises to return 95% of reserve yields to the community, Paxos highlights enterprise infrastructure and compliance advantages, while Frax Finance proposes a zero-fee model. According to the Polymarket prediction market, Native Markets is currently in the lead, with Paxos in second; the outcome will be officially determined via on-chain voting this Sunday.
On a deeper level, the far-reaching impact of this bidding war goes beyond immediate profits and touches on the fundamental issue of stablecoin governance and control. Analysts view this as a litmus test for the battle between traditional financial institutions and native DeFi teams over the next-generation stablecoin infrastructure.
An Unprecedented Contest for Issuance Rights
Hyperliquid's move to open up the bidding for USDH issuance rights is unprecedented in stablecoin history. The platform's monthly trading volume approaches $400 billion, with $106 million in fees generated in August alone, accounting for about 70% of the decentralized perpetual market share. Currently, on-chain dollar liquidity on Hyperliquid mainly relies on USDC, with circulating volume once reaching $5.7 billion.
The bidding attracted ten major institutions, including Ethena Labs, Paxos, Frax Finance, Sky Ecosystem, Curve Finance, Native Markets, Bastion Platform, and Agora. The winner will gain the right to issue USDH, expected to reach a multi-billion dollar scale, and share approximately $220 million in annual reserve income.
The proposal submission deadline is September 10, 10:00 UTC, and validator voting will begin on September 14. Voting weight is calculated based on staked amounts, and the foundation will abstain in practice to ensure community-led decision-making.
According to the latest auction predictions from Polymarket as of September 10, Native Markets leads with a 74% chance of winning, Paxos is second with a 15% probability, and Ethena is third with a 12% chance of winning.
Three Major Camps in Fierce Competition
This "draft pick" has drawn many top industry players with clear distinctions in their proposals, each representing a different path for the future development of stablecoins:
Ethena officially joined the competition on Tuesday, backed by the world’s largest asset manager, BlackRock. Legacy stablecoin company Paxos—the issuer of products like PAX Gold and Global Dollar—also participated actively, while Agora (issuer of AUSD, the 29th largest stablecoin by market cap) directly questioned Native Markets' reliance on Stripe.
Traditional Compliance Route: Paxos's "Regulatory Advantage" Card
Legacy stablecoin issuer Paxos leverages its strong foundation in regulatory compliance to propose the most "traditional finance" approach. Paxos promises that USDH will fully comply with the U.S. Stablecoin Innovation Act and the European Union’s MiCA rules, and will use 95% of reserve interest income for HYPE token buybacks.
In its updated v2 proposal, Paxos further announces a partnership with PayPal and plans to get HYPE listed on the PayPal/Venmo platforms, while offering $20 million in ecosystem incentives. The proposal also promises legal issuance of stablecoins in Europe, paving the way for global expansion of USDH.
DeFi Native Camp: Frax's "Zero Fee" Commitment
DeFi pioneer Frax Finance takes a more aggressive path. Its core proposal is to peg USDH 1:1 with frxUSD and commit to returning 100% of underlying treasury yields to Hyperliquid users through on-chain programmable logic, with Frax itself taking zero cut.
This plan embodies pure Web3 principles, aiming to turn stablecoins from centralized profit tools into public infrastructure serving the decentralized ecosystem. Frax emphasizes community governance in the allocation of returns, with all operations executed by smart contracts.
Cross-Border Giant: Sky's "Balance Sheet" Strategy
Former MakerDAO member Sky Ecosystem proposes a unique multi-collateral plan. Sky promises to provide USDH with $2.2 billion in immediate USDC liquidity and plans to deploy over $8 billion of its balance sheet into the Hyperliquid ecosystem.
The proposal would give all USDH users on Hyperliquid a 4.85% yield, higher than U.S. treasury yields, with all returns going into the HYPE buyback fund. Sky also plans to invest $25 million to create an independent Hyperliquid Star project.
Will the Stablecoin Power Structure Face Profound Change?
The significance of this bidding war goes far beyond choosing a single project’s token—it reveals deep changes within the stablecoin market’s power structure. Traditionally, issuers like Circle and Tether enjoyed a "central bank-like" status, dominating huge interest incomes from reserve assets thanks to first-mover advantage and scale.
Hyperliquid’s approach offers a new paradigm for the entire DeFi industry: leading protocols can leverage their own "asset gravity" to demand revenue sharing, customized services, and ecological empowerment from stablecoin issuers. This will force stablecoin issuers to shift from their lofty "central bank" roles to competing "commercial banks".
The successful implementation of USDH would mean that hundreds of millions in annual interest income would accrue directly to the community, rather than to external issuers. If this model is adopted by other major protocols, it could fundamentally reshape the value distribution mechanism of stablecoins, driving profits from issuers’ balance sheets back to the DeFi ecosystems that actually create value.
Analysts believe this competition is a key test in the battle between traditional financial institutions and native DeFi teams for dominance over next-generation stablecoin infrastructure. The final outcome will influence the future of stablecoin governance—whether regulatory compliance or decentralized innovation will prevail.
As the crypto ecosystem matures, more "ecosystem-native" stablecoins may emerge—tightly bound to specific ecosystems, with design and profit distribution mechanisms serving the long-term development of those ecosystems. This marks the evolution of stablecoins from "general-purpose money" to "ecosystem dollars."
Overall, Hyperliquid’s bold move will undoubtedly challenge the current stablecoin market dominated by Tether and Circle. It will force these giants to reconsider their relationships with DeFi protocols and may prompt them to adopt more active cooperation and profit-sharing strategies to meet these emerging challenges.
Risk Disclosure and DisclaimerThe market carries risks, and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account any individual user’s specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular circumstances. Any investment based on this article is at your own risk. ```