Disrupting the Stablecoin Landscape? An "Unprecedented" Auction Captivates Everyone in the Crypto Circle

An unprecedented bidding war for the issuance rights of stablecoins is rewriting the power dynamics of the cryptocurrency market. On September 5th, the decentralized exchange Hyperliquid publicly auctioned the issuance rights of its native stablecoin USDH, attracting fierce competition from ten major institutions including Ethena Labs, Paxos, Frax Finance, and Sky Ecosystem, vying for an annual revenue stream of up to $220 million. This bidding, determined by validator votes, represents an unprecedented democratization of stablecoin choice. Hyperliquid, a leading decentralized derivatives trading platform with daily trading volumes in the billions, aims to reduce reliance on external stablecoins like USDC and bring value back to its own ecosystem through treasury yields. The proposals from various bidders differ significantly, ranging from fiat-backed to decentralized collateralized debt positions. Ethena Labs promises to return 95% of reserve profits to the community, Paxos emphasizes its corporate infrastructure and compliance advantages, while Frax Finance proposes a zero-fee model. According to Polymarket's prediction market, Native Markets is currently leading, with Paxos in second place, and the competition will officially conclude on Sunday through on-chain voting. At a deeper level, the far-reaching implications of this bidding extend beyond immediate profits, touching on fundamental issues of stablecoin governance and control. Analysts view this as a litmus test for the competition between traditional financial institutions and native DeFi teams for dominance over the next generation of stablecoin infrastructure. An Unprecedented Battle for Issuance Rights Hyperliquid's move to publicly auction the issuance rights of USDH is a first in the history of stablecoins. The platform's monthly trading volume approaches $400 billion, with August's single-month fee revenue reaching $106 million, accounting for about 70% of the decentralized perpetual market. Currently, Hyperliquid's on-chain dollar liquidity primarily relies on USDC, with a circulation scale that once reached $5.7 billion. The bidding has attracted ten major institutions, including Ethena Labs, Paxos, Frax Finance, Sky Ecosystem, Curve Finance, Native Markets, Bastion Platform, and Agora. The winning party will control the issuance rights of USDH, which is expected to reach a scale of billions of dollars, and receive an annual reserve profit share of about $220 million. The proposal submission deadline is September 10th at 10:00 UTC, and validator voting will commence on September 14th. Voting weight is calculated based on the amount staked, and the foundation will effectively abstain to ensure a community-led decision-making process. According to the latest auction predictions, as of September 10th, Polymarket's forecast data shows that Native Markets is leading with a 74% chance of winning, followed by Paxos with a 15% probability, and Ethena in third place with a 12% chance of winning. Three Major Camps in Fierce Competition This "draft" has attracted many top players in the industry, with their proposals clearly delineated, representing different routes for the future development of stablecoins: Ethena officially entered the competition on Tuesday, supported by BlackRock, the world's largest asset management company. The established stablecoin company Paxos—issuer of products like PAX Gold and Global Dollar—also actively participates in the competition, while Agora, the issuer of AUSD (the 29th largest stablecoin by market capitalization), directly questions Native Markets' reliance on Stripe. Traditional Compliance Route: Paxos's "Regulatory Advantage" Card Established stablecoin issuer Paxos, with its deep accumulation in regulatory compliance, proposed the most "traditional finance" characteristic plan. Paxos promises that USDH will fully comply with the U.S. Stablecoin Innovation Act and the EU MiCA regulations, and will use 95% of reserve interest income for HYPE token repurchases. In the updated v2 proposal, Paxos further escalated its efforts by announcing a partnership with PayPal, planning to promote HYPE's launch on the PayPal/Venmo platform and providing $20 million in ecosystem incentives. This plan also promises to legally issue stablecoins in Europe, paving the way for USDH's global expansion. DeFi Native Camp: Frax's "Zero Fee" Commitment Innovative pioneer in the DeFi space, Frax Finance, chose a more aggressive route. The core of its proposal is to peg USDH to frxUSD at a 1:1 ratio and promises to return 100% of the underlying treasury bond yields to Hyperliquid users through on-chain programmatic methods, with Frax itself taking zero cut. This proposal embodies the pure spirit of Web3, attempting to transform stablecoins from centralized profit tools into public infrastructure serving decentralized ecosystems. Frax emphasizes the decisive role of community governance in revenue distribution, with all operations executed through smart contracts. Cross-Industry Giants: Sky's "Balance Sheet" Strategy The original MakerDAO's Sky Ecosystem proposed a unique multi-collateral scheme. Sky promises to provide $2.2 billion in USDC as immediate liquidity for USDH and plans to deploy its over $8 billion balance sheet into the Hyperliquid ecosystem The proposal suggests that all USDH on Hyperliquid will yield 4.85%, higher than government bond yields, and all profits will be used for the HYPE repurchase fund. Sky also plans to provide $25 million in funding to create an independent Hyperliquid Star project. Will the power structure of stablecoins undergo profound changes? The significance of this bidding goes far beyond the token selection of a single project; it reveals a profound shift in the power structure of the stablecoin market. Traditionally, issuers like Circle and Tether have enjoyed a "central bank" status due to their first-mover advantage and economies of scale, monopolizing the massive interest income generated from reserve assets. Hyperliquid's approach provides a new paradigm for the entire DeFi industry: leading protocols can leverage their own "asset gravity" to demand revenue sharing, customized services, and ecosystem empowerment from stablecoin issuers. This will force stablecoin issuers to transition from their lofty "central bank" roles to competing "commercial banks." The successful implementation of USDH will mean that hundreds of millions of dollars in annual interest income will directly belong to the community, rather than external issuers. If this model is emulated by other leading protocols, it will fundamentally reshape the value distribution mechanism of stablecoins, driving profits back from the issuers' balance sheets to the DeFi ecosystem that truly creates value. Analysts believe that this competition is a key experiment in the struggle for dominance over the next generation of stablecoin infrastructure between traditional financial institutions and native DeFi teams. The final outcome will influence the evolution of stablecoin governance models, determining whether regulatory compliance or decentralized innovation prevails. As the crypto ecosystem continues to mature, more "ecosystem-native" stablecoins may emerge, deeply tied to specific ecosystems, with mechanism design and profit distribution serving the long-term development of that ecosystem. This marks a trend of evolution for stablecoins from "universal currency" to "ecosystem dollar." Overall, Hyperliquid's bold attempt will undoubtedly impact the existing monopoly of Tether and Circle in the stablecoin market. It will force these giants to reassess their relationships with DeFi protocols and may prompt them to adopt more proactive cooperation and profit-sharing strategies to address emerging challenges. Risk Warning and Disclaimer The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk