Ethena Labs Withdraws Bid for Hyperliquid’s USDH Stablecoin Amid Pushback

Ethena Labs has withdrawn its proposal to issue Hyperliquid’s upcoming USDH stablecoin, following vocal opposition from the community and ecosystem validators.

Key Takeaways:

• Ethena Labs has withdrawn its USDH proposal after community pushback over alignment and focus.
• The move clears the way for Native Markets, while Ethena shifts focus to other Hyperliquid-based products.
• Paxos emerges as a leading contender with a PayPal-backed proposal and strong validator appeal.

The decision, announced by founder Guy Young on Thursday, marks a notable retreat in a high-stakes contest among several major players vying for the role of USDH issuer.

In a statement shared on X, Young acknowledged the community’s concerns, namely that Ethena is not a Hyperliquid-native team, operates multiple product lines beyond stablecoins, and is not committed to a single exchange partner.

“These are valid and we accept the pushback,” Young wrote. “We will respectfully be withdrawing our proposal to allow validators to signal their support elsewhere.”

The move appears to clear a path for Native Markets, another contender whose grassroots support has grown rapidly.

Young publicly congratulated them, adding, “No one gives a f*** how big you are… It’s a level playing field.”

While exiting the USDH race, Ethena Labs emphasized it would continue to invest deeply in the Hyperliquid ecosystem.

Its roadmap includes the rollout of hUSDe (a native synthetic dollar), new savings and card-based products using USDe, and innovative use of the HIP-3 protocol for hedging, modular prime brokerage, and perpetual equity trading.

“Outcompeting on product has always been our focus,” Young stated.

The last few days have been incredible to witness. I've never seen a community rally around and engage with passion like this before.

Following direct discussions with individuals in the community and validators we have taken onboard some of the concerns, namely:

-Ethena is not…

The withdrawal comes as competition around USDH issuance intensifies. Paxos, which released a revised proposal earlier this week, now appears to be a frontrunner.

Paxos’ Version 2 pitch includes a deep integration of USDH into PayPal and Venmo, zero-cost on/off-ramps, and a $20 million incentive plan.

It also commits all USDH revenue to Hyperliquid’s growth until $1 billion in total value locked (TVL) is reached, with Paxos capping its own share at 5% beyond $5 billion.

Validators will begin voting on September 14, with other notable proposals submitted by Frax Finance, the Agora–Rain–LayerZero consortium, and Sky. The Hyperliquid Foundation remains neutral.

The recent passage of the GENIUS Act, signed by President Trump, aims to cement the dollar’s dominance by backing dollar-pegged stablecoins in global markets.

The Treasury Department expects the stablecoin market to exceed $2 trillion by 2028, a projection that places greater emphasis on liquidity, interoperability, and regulatory alignment across the ecosystem. Tether’s latest move underscores a pragmatic shift toward that future.

As reported, Ripple CEO Brad Garlinghouse has said the stablecoin sector is poised for explosive growth, projecting the market could balloon from its current $250 billion capitalization to as much as $2 trillion in the near future.

“Many people think it will reach $1 to $2 trillion in a handful of years,” Garlinghouse said, adding that Ripple is positioned to benefit from that trajectory.

Meanwhile, Western Union is positioning itself for a new phase of digital transformation, signaling strong interest in using stablecoins to modernize its global remittance operations.

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