Ethena Exits Hyperliquid USDH Stablecoin Race, Native Markets Gains Momentum

The race for Hyperliquid’s USDH stablecoin contract took a dramatic turn when Ethena Labs announced its withdrawal from the competition. On September 11, 2025, Ethena Labs announced its withdrawal from Hyperliquid’s USDH stablecoin bidding race, effectively clearing a significant obstacle for Native Markets and reshaping the competitive landscape.

This strategic exit follows intense community debate about whether established players like Ethena align with Hyperliquid’s ecosystem values. Earlier in the week, Ethena joined the Hyperliquid stablecoin contest, which has attracted several teams, including Paxos, vying to manage USDH. However, community feedback quickly raised concerns about the suitability of external entities managing the platform’s native stablecoin.

Native Markets Dominates USDH Stablecoin Voting Process

Native Markets leads in Hyperliquid’s stablecoin vote with 30.8% of the delegated stake, but 57% remains unassigned. This commanding position reflects the community’s preference for ecosystem-native solutions over external alternatives. The firm was created for this competition, demonstrating a focused commitment to Hyperliquid’s long-term success.

Native Markets was formed specifically to compete for USDH and is led by Max Fiege, an investor within the Hyperliquid ecosystem. This insider advantage proves crucial in gaining validator trust and community support. Their proposal emphasizes deep ecosystem integration rather than external partnerships.

The voting mechanism allows HYPE token holders to delegate their stakes to preferred candidates. According to Hyperliquid, Native Markets holds over 30% of the delegated stake, with the next-largest being Paxos, with 7.6% of the stake. This substantial lead indicates strong community confidence in Native Markets’ vision.

USDH Stablecoin Competition Attracts Major Players

The contest has drawn attention from prominent stablecoin issuers seeking to capture Hyperliquid’s substantial market opportunity. “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,” explained David Lawant, head of research at FalconX.

Ethena’s original proposal involved backing USDH entirely with USDtb, leveraging BlackRock’s BUIDL infrastructure. Its pitch involved backing the stablecoin entirely with USDtb, a token connected to BlackRock’s BUIDL. The team also pledged to return nearly all revenue to the ecosystem. Despite these attractive terms, community sentiment favored native solutions.

Native Markets was created specifically for this competition and focuses entirely on building within the Hyperliquid ecosystem. Their proposal centers on using Stripe’s Bridge infrastructure to issue USDH while splitting revenue between HYPE token buybacks and ecosystem growth. This approach resonates with validators seeking aligned incentives.

Regulatory Implications for Stablecoin Development

The withdrawal highlights growing awareness of regulatory considerations in stablecoin issuance. Established players like Ethena carry regulatory baggage that may complicate operations within emerging ecosystems. Native solutions potentially offer cleaner regulatory pathways and reduced compliance complexity.

The firm’s pitch proposes a hybrid reserve model in which off-chain assets would be managed by BlackRock, while the on-chain reserves would be held through Superstate. This structure attempts to balance regulatory compliance with decentralized principles, appealing to both traditional finance and crypto-native participants.

Market participants increasingly recognize that stablecoin success depends on community alignment beyond technical capabilities. The Hyperliquid community’s preference for Native Markets demonstrates this principle in action. Ecosystem-native solutions can move faster and adapt more readily to community needs.

Market Sentiment Favors Native Markets

Native Markets heavily favored on Polymarket to win bid to issue Hyperliquid’s USDH stablecoin, with prediction markets reflecting the strong community consensus. This betting market activity indicates widespread expectation that Native Markets will secure the contract.

The competitive dynamics reveal broader trends in DeFi governance and stablecoin development. Communities increasingly prefer aligned partners over external entities, regardless of their credentials or backing. This shift represents maturation in how decentralized protocols evaluate potential partners.

Native Markets’ lead position stems from their ecosystem-first approach and commitment to HYPE token utility. Their revenue-sharing model directs proceeds toward token buybacks and ecosystem development, creating positive feedback loops that benefit all participants.

Conclusion

Ethena’s strategic withdrawal from the USDH competition removes a significant competitor and strengthens Native Markets’ position. The community’s clear preference for ecosystem-aligned solutions signals a broader trend toward native development in DeFi protocols. As the September 14 voting deadline approaches, Native Markets appears positioned to secure Hyperliquid’s stablecoin contract, potentially reshaping the platform’s economic dynamics and establishing new precedents for community-driven partner selection.