Ethena Labs Withdraws from Hyperliquid’s USDH Stablecoin Issuance Competition

Ethena Labs has stepped back from Hyperliquid’s USDH stablecoin issuance competition after acknowledging community concerns about its position as a non-native team. This decision comes after direct conversations with validators and delegates who raised doubts over Ethena’s focus and alignment with Hyperliquid’s ecosystem.

Community Concerns and Pushback

According to a Sept. 11 post on X by Ethena founder Guy Young, the decision to withdraw was driven by three key concerns from the Hyperliquid community. These concerns included Ethena’s lack of native ties to the exchange, its wider product ambitions beyond USDH, and the perception that its growth strategy was not fully aligned with Hyperliquid. The community’s pushback ultimately led to Ethena’s withdrawal from the competition.

A New Path Forward for Native Markets

In his statement, Young praised the rival proposal from Native Markets, which has gained traction in the community. “Congratulations to the Native Markets team. You deserve this,” Young wrote, acknowledging the success of the native team. He added that Hyperliquid’s governance process demonstrated how smaller, community-driven projects could succeed regardless of pedigree or financial backing.

Ethena’s Initial Proposal and Support

Ethena’s initial bid proposed issuing USDH through Anchorage Digital Bank’s upcoming USDtb token, indirectly collateralized by BlackRock’s $2 billion BUIDL fund. The team had support from high-profile individuals, including BlackRock’s head of digital assets, Robert Mitchnick, and Anchorage’s chief executive officer Nathan McCauley. Despite this, validators’ opinions were ultimately swayed against Ethena’s bid due to concerns about centralization and its external focus.

Ethena’s Commitment to Hyperliquid

Ethena’s team made it clear that it is still dedicated to developing within Hyperliquid, even after leaving the USDH race. Young pointed to upcoming products, including Hyperliquid-native synthetic dollars, USDe-enabled savings and card spending tools, and new derivatives such as equities-based perpetual swaps. The team also plans to leverage its $13 billion Ethena USDe balance sheet to provide liquidity and expand Hyperliquid’s HIP-3 markets.

Future Developments and Ambitions

The team plans to introduce innovations like modular prime broking and reward-bearing collateral. “Our ambitions extend beyond working with just one partner exchange,” Young said, signaling that Ethena intends to remain a key player in Hyperliquid’s ecosystem despite the setback. This outcome marks a turning point for Hyperliquid, where local builders have been given preference by community governance over outsiders.

Implications for Hyperliquid’s Future

Since Native Markets now most likely control USDH’s future, the exchange’s approach to stablecoin issuance could shape its risk profile and growth trajectory for years to come. The decision to prioritize native teams and community-driven projects may have a lasting impact on Hyperliquid’s ecosystem and its position in the market. As the situation continues to unfold, it will be interesting to see how Hyperliquid and its community navigate the complexities of stablecoin issuance and ecosystem development, and how this affects the broader bitpulse landscape.