The team behind the USDe synthetic dollar protocol, Ethena, has withdrawn its bid to issue the USDH stablecoin for Hyperliquid, acknowledging the concerns raised after direct discussions with community members and validators.
In a statement on X on Thursday, the Ethena team admitted to facing opposition due to not being a native project of Hyperliquid and stated that they would exit the competition, congratulating their competitor Native Markets, which is now seen as the frontrunner in the race.
Ethena Labs founder Guy Young wrote: "While some complain about their [Native Markets] lack of credibility, I believe their success here perfectly embodies the uniqueness of Hyperliquid and its community." He added:
Ethena's exit marks a significant shift in the bidding process, which attracted multiple teams to submit proposals for issuing USDH, Hyperliquid's upcoming native stablecoin.
With Ethena's withdrawal, prediction markets on Polymarket give Native Markets a 92% chance of winning, with Paxos in second place at about 7%.
Not everyone agrees with Ethena's assessment that the bidding is a fair 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 "begins to feel that the USDH RFP is a bit of a farce," claiming that validators seem unwilling to seriously consider any teams other than Native Markets.
He added that Native Markets' bid appeared to emerge almost immediately after the proposal announcement, "suggesting they were tipped off in advance," while other bidders rushed to prepare their submissions. He stated that the process seems "tailored for Native Markets," despite stronger proposals from more established participants like Paxos, Ethena, and Agora.
Lilian Aliaga, COO and co-founder of OAK Research, questioned how Native Markets had already secured over 70% of the committed votes. He wrote on X: "With all due respect, I just don't understand how they can turn USDH into a multi-billion dollar stablecoin." He added that this outcome indicates "bias."
Others hold different views. Sam MacPherson, CEO and co-founder of Phoenix Labs and a core contributor to Spark, told Cointelegraph: "…Native Markets could very well be the most suitable choice. However, in terms of fiat-backed stablecoin issuers, Paxos is the industry leader in this space, having issued USDP, PYUSD, USDG, and more."
Regardless of who ultimately wins, the outcome will have significant implications for Hyperliquid and the broader stablecoin market.
David Lawant, head of research at FalconX, stated: "The stakes are high: approximately $5 billion of USDC is deposited on Hyperliquid, which roughly translates to about 10% of Circle's business (or about $200 million in annual revenue) coming from this."
The USDH vote is Hyperliquid's first major governance decision aside from the regular asset delistings. Voting is conducted entirely on-chain, with validator power determined by the amount of staked HYPE tokens. Proposals must receive a two-thirds majority of the total staked amount to pass.
After validators indicate their intentions, delegators can re-delegate HYPE to validators that align with their preferences.
Two participants could have dominated the outcome—Hyperliquid Foundation and liquid staking provider Kinetiq, which together control about 63% of the total staked amount—but both have committed to abstaining.
The timeline is tight. Proposals closed on Wednesday, and validators have 24 hours to announce their support, followed by a brief re-delegation window. The final vote will take place on Sunday from 10 AM to 11 AM (UTC).
Native Markets is a newly formed organization created to compete for the authorization to issue Hyperliquid's first native stablecoin, USDH. The team is led by Hyperliquid investor and advisor Max Fiege, with members including former Uniswap Labs president and COO MC Lader, and blockchain researcher and former Paradigm contributor Anish Agnihotri.
The company's proposal positions itself as the most "Hyperliquid native" option, promising to mint USDH on HyperEVM and reinvest revenues back into the ecosystem.
Half of the interest generated from USDH reserves will be used for HYPE buybacks through an aid fund, while the other half will be dedicated to ecosystem growth, including the HIP-3 market and HyperEVM applications.
USDH will be backed by cash and short-term U.S. Treasury bonds, with off-chain reserves initially managed by BlackRock, and on-chain reserves overseen by Superstate through Stripe's Bridge.
The reliance on Bridge has drawn some criticism, with concerns that it could create a single point of failure.
Agora founder Nick VanEck questioned whether Stripe's broader ambitions might conflict with Hyperliquid. "If Hyperliquid hands its stablecoin to a vertically integrated issuer like Stripe with obvious conflicts, what are we even doing?"
Fiege acknowledged this scrutiny: "We know we are a new team and do not take lightly the responsibility to prove ourselves," he wrote on X on Thursday.
Related: New players in the stablecoin race: Can USDH accelerate?
Original article: “Ethena Exits Hyperliquid USDH Stablecoin Bid, Clearing the Path for Native Markets”
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