Hyperliquid’s USDH Stablecoin: Opportunity or Foul Play?

Hyperliquid, a well-known decentralized exchange built upon its own layer-1 network, is reviewing proposals from teams aiming to launch a USDH stablecoin. This stablecoin is intended to prioritize the Hyperliquid ecosystem and align with its objectives.

However, a current stablecoin operating on Hyperliquid is protesting this move, citing that they were formerly denied the opportunity to use the USDH ticker. The timing of the Foundation’s announcement has also sparked debate.

Announced on Friday via Discord, the USDH ticker will be granted to the team that develops a “Hyperliquid-first,” “Hyperliquid-aligned,” and regulation-abiding USD stablecoin. Validators will decide, during a five-day voting period, which team will construct a stablecoin specifically and originally made for Hyperliquid.

As of this writing, the USDH Discord channel has seen three proposals. One has been largely disregarded by the community, another is facing claims of having an unfair advantage, and the third is at the center of the controversy.

Native Markets submitted their proposal shortly after the announcement. They aim to create a stablecoin compliant with the GENIUS Act, incorporating integrated fiat onramps. They also propose sharing reserve profits with the Hyperliquid Assistance Fund. This idea has become one of the more favorably received ideas so far.

However, Hyperstable, an existing stablecoin project active on Hyperliquid, located at Hyperstable, is speaking out against the newly announced plans for USDH.

Max, the author of the Hyperstable post, asserted that the USDH ticker was formerly prohibited, which led Hyperstable to use USH instead. Max claims it’s “unfair” to change the policy given that builders have adjusted, launched, and now face significant consequences.

“It seems unfair that the goal posts are now shifted after the game has already started months ago,” Max explained. “If the Foundation wishes to maintain its credibly neutral reputation with existing and future teams constructing on HyperEVM, they should indefinitely keep the USDH ticker prohibited or develop an in-house stablecoin.”

Another user, Shisho, who seems to be a co-founder of Hyperliquid DEX aggregator LiquidLaunch, pushed back on the argument, explaining that the legal and regulatory landscape has changed following the GENIUS Act becoming law.

Concerns didn’t end there. Discord user HyperInvestigator claimed that Native Market’s proposed deployer address received funding from a recently established wallet just five hours before the USDH announcement, raising eyebrows about timing.

“Is Native Markets functioning independently, or is there an undisclosed connection with HL Labs/HL Foundation?” wrote HyperInvestigator on Discord. “If that’s the case, given that the Hyper Foundation’s validators control >60% of HYPE staking, will the Hyper Foundation validators still engage in voting?”

Max from Hyperstable mentioned that Native Market’s proposal appears well-written and lengthy, which raised suspicion that they had early notification.

Hyperstable, Native Markets proposer Max Fiege, and Hyperliquid have not yet responded to requests for comment from Decrypt.

In the midst of this controversy, Hyperliquid validators must now choose which team will receive the USDH ticker over the next five days. Following the attainment of a quorum, the ticker will then be transferred to the address specified in the victorious proposal.

This is only the latest of several stablecoins that have arrived this year. World Liberty Financial, a group associated with Donald Trump, is launching USD1, MetaMask is readying their mmUSD stablecoin, and even retailers such as Amazon and Walmart are considering similar options.

Paul Faecks, CEO of Plasma, a stablecoin network, told Decrypt that “Stablecoins have emerged as crypto’s most dominant use-case. This ranges from DeFi to payments. We anticipate that as the sector develops, institutions, chains, and already existing on-chain applications will launch many more stablecoins.”