Ethena Exits USDH Race Ahead of Vote

Ethena, the team behind the USDe synthetic dollar protocol, withdrew its bid to issue Hyperliquid’s USDH stablecoin, conceding to concerns raised in direct discussions with community members and validators. 

In a X statement Thursday, the Ethena team acknowledged pushback over not being a Hyperliquid-native project and said it would step aside, congratulating rival Native Markets, now viewed as the frontrunner in the race.

“While some are complaining about their [Native Markets] lack of credibility I think their success here perfectly embodies everything which is so special about Hyperliquid and their community,” wrote Ethena Labs founder Guy Young, adding:

“It is a level playing field where emergent players can win the hearts of the community and are given a fair shot at succeeding.”

Ethena’s withdrawal marks a major shift in the bidding process, which has drawn proposals from multiple teams to issue USDH, Hyperliquid’s forthcoming native stablecoin. 

With Ethena out, prediction markets on Polymarket are giving Native Markets a 92% chance of winning, with Paxos in second place at roughly 7% at time of writing.

Related: How Hyperliquid hit $330B in monthly trading volume with just 11 employees

Critics question the fairness of the USDH bidding process

Not everyone agrees with Ethena’s assessment that the bidding was a level 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 was “starting to feel like the USDH RFP was a bit of a farce,” claiming validators appeared unwilling to seriously consider any team besides Native Markets.

He added that Native Markets’ bid appeared almost immediately after the Request for Proposals was announced, “implying they had advanced notice,” while other bidders scrambled to prepare submissions. He said the process seemed “custom made for Native Markets,” despite stronger proposals from more established players like Paxos, Ethena and Agora.

Lilian Aliaga, chief operating officer and co-founder of OAK Research, questioned how Native Markets had already secured more than 70% of committed votes. “With all due respect, I just don’t see how they can turn USDH into a multi-billion stablecoin,” he wrote on X, adding that the outcome suggested “bias is at play.”

Others have a different perspective. Sam MacPherson, CEO and co-founder of Phoenix Labs and a core contributor to Spark, told Cointelegraph that “…it is entirely possible that Native Markets is the best fit. However, in terms of fiat-backed stablecoin issuers, Paxos is the industry leader in the space having issued USDP, PYUSD, USDG, and others.”

Whoever emerges victorious, the outcome will carry significant weight for Hyperliquid and the broader stablecoin market.

“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,” said David Lawant, head of research at FalconX.

Related: Banks should offer better rates to counter stablecoins: Bitwise CIO 

How the USDH vote works

The USDH vote is Hyperliquid’s first major governance decision beyond routine asset de-listings. Voting occurs entirely onchain, with validator power determined by the amount of HYPE tokens staked. A proposal must clear a two-thirds majority of the total stake to pass.

After validators signal their intentions, delegators can redelegate HYPE to validators aligned with their preferences.

Two players could have dominated the outcome — the Hyperliquid Foundation and liquid staking provider Kinetiq, which together control about 63% of total stake — but both have pledged to abstain.

The timeline is tight. Proposals closed on Wednesday, with validators given 24 hours to declare support, followed by a short redelegation window. The final vote will be held Sunday between 10:00 and 11:00 UTC. 

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This is a developing story, and further information will be added as it becomes available.