Ethena Proposes Management of Hyperliquid’s USDH Stablecoin

Ethena has put forth a proposal to manage the USDH stablecoin, which is being developed by Hyperliquid. This initiative positions Ethena against competitors such as Sky, Frax, and Agora. By leveraging partnerships with reputable institutions like Anchorage Digital Bank and BlackRock, Ethena aims to provide a secure and scalable stablecoin solution for the Hyperliquid ecosystem.

Key Takeaways

Ethena proposes to manage USDH, Hyperliquid’s native stablecoin.
The USDH stablecoin will be backed by USDtb, issued by Anchorage Digital Bank, and collateralized by BlackRock’s BUIDL fund.
Ethena has pledged to return 95% of net revenues from USDH to the Hyperliquid community.
An elected guardian network will oversee USDH governance for added security.
Ethena plans to invest $75 million in incentives to enhance Hyperliquid's offerings.

Ethena USDH stablecoin proposal on Hyperliquid

Ethena's Bid for USDH Management

Ethena has officially submitted a proposal to take charge of USDH, the upcoming native stablecoin from Hyperliquid. This strategic move places Ethena in competition with other established stablecoin projects such as Sky, Frax, and Agora.

As detailed in Ethena's governance proposal dated September 9, the USDH stablecoin is set to be backed by USDtb, a payment token scheduled for release by Anchorage Digital Bank on October 1. Additionally, it will have indirect collateralization through BlackRock’s BUIDL fund.

Ethena argues that this backing combines the credibility of institutional support with the benefits of compliance and scalability. The firm has experience in this area, having successfully minted and redeemed over $23 billion in tokenized dollar assets without any service interruptions.

Under the proposed plan, USDH would be fully backed by USDtb, which Ethena confirms is the only stablecoin approved by BlackRock for collateralization within BUIDL. Anchorage, notable for being the first OCC-chartered crypto bank in the U.S., is designated as both the issuer and custodian of the stablecoin.

Ethena has received positive endorsements from key partners. Robert Mitchnick, head of digital assets at BlackRock, stated that USDtb is “uniquely positioned to provide institutional-grade cash management along with on-chain liquidity.” Furthermore, Anchorage CEO Nathan McCauley mentioned that this collaboration would enable Hyperliquid to have “a sovereign stablecoin that fosters ecosystem growth.”

To ensure the interests of the Hyperliquid community, Ethena has committed to directing at least 95% of the net revenues from USDH reserves back to community initiatives. This includes funding for the Assistance Fund and Hyperliquid token buybacks, along with future discussions about distributing yield directly to staked validators.

Focus on Security

Ethena's proposal places significant importance on security, highlighting potential systemic risks associated with a mismanaged stablecoin. Given that stable assets support every perpetual trading pair on Hyperliquid, the company aims to establish a governance model overseen by an elected guardian network of validators. This group may include LayerZero (ZRO) and would possess the authority to freeze or reissue tokens during emergencies.

Investments in Growth

Beyond its stablecoin initiative, Ethena has pledged to invest a minimum of $75 million in incentives designed to enhance Hyperliquid's HIP-3 front-ends. These funds will also support the development of new products like hUSDe, a Hyperliquid-native derivative of Ethena USDe.

Ethena has clarified that its current balance sheet of $13 billion in USDe can be utilized to stabilize liquidity throughout Hyperliquid’s trading environments. This reinforces Ethena's position as a capable partner poised to scale USDH to multi-billion dollar supplies.

Currently, Hyperliquid circulates over $5 billion in USD Coin (USDC). The decision regarding the issuance of USDH could significantly influence the risk profile of the exchange for the foreseeable future. Ethena, already recognized for its management of USDe—now the third largest crypto dollar—positions itself as both a reliable and progressive option for this role.