Ethena Labs has officially withdrawn its proposal to issue Hyperliquid’s USDH stablecoin.
Founder Guy Young made the announcement on X, stating that after discussions with the community and validators, the team decided to step aside. His post reflected admiration for the passion of the Hyperliquid community, while recognizing the concerns raised about Ethena’s position.
According to Young, several issues drove the decision:
- Ethena is not a Hyperliquid-native team.
- The company has broader product lines outside of USDH.
- Its ambitions extend beyond a single partner exchange.
“These are valid and we accept the pushback,” Young wrote. He confirmed Ethena will withdraw its proposal, allowing validators to shift their support elsewhere.
Community First
Young congratulated the Native Markets team for securing momentum with the community. While some critics pointed at their lack of track record, he emphasized that Hyperliquid embodies a culture where “no one gives a fuck how big you are, your background, pedigree, or financial resources.” For him, this is what makes the Hyperliquid ecosystem unique: a level playing field where emerging players can succeed.
On @HyperliquidX and $USDH – Deep dive into @withAUSD, @SkyEcosystem and @ethena_labs (now withdrawn) proposals
1️⃣ @withAUSD
Backing:
Issued through Agora’s stablecoin infrastructure, "GENIUS compliant" and licensed across global jurisdictions. Reserves backed by short-dated… pic.twitter.com/CqPx9YUBKA
— francesco (war mode) 🏰 (@francescoweb3) September 12, 2025
What’s Next for Ethena?
Despite withdrawing from the USDH race, Ethena remains committed to Hyperliquid. Young made clear that stable yield from Treasury bills was never the exciting part of their vision. Instead, the team will focus on developing new products with native partners, including:
- hUSDe: synthetic native dollars.
- USDe-enabled savings and cards: consumer-facing payment products.
- Hedging flows: on Hyperliquid’s trading infrastructure.
HIP-3 innovations, such as:
- Reward-bearing collateral.
- Modular prime broking.
- Perpetual swaps on equities.
In his words, Ethena will continue to “outcompete everyone else on product regardless.”
The Proposals on the Table
Ethena’s withdrawal leaves the spotlight on two other major proposals: @withAUSD and @SkyEcosystem. Each represents a different vision for USDH.
1. @withAUSD
Backing:
- Built on Agora’s stablecoin infrastructure.
- GENIUS compliant, licensed globally.
- Reserves: short-term US Treasuries, overnight repo, and cash.
- Custody and management via State Street and VanEck.
Value Capture:
- 100% of net revenue flows into the Assistance Fund or HYPE buybacks.
- Full alignment with Hyperliquid’s growth.
Liquidity & Market Structure:
- $10M seeded liquidity on launch.
- @LayerZero_Core for cross-chain operability.
- Payment adoption via Rain with fiat on/off ramps.
- @MoonPay and @Ether_Fi for wallet and card integration.
Unique Edge:
Institutional credibility, immediate liquidity, and global payments reach.
2. @SkyEcosystem
Backing:
- Stablecoin structure modeled on DAI and USDS.
- Backed by $13B collateral.
- Not GENIUS compliant, but strong governance framework.
- S&P credit rating of B– (as of August 2025).
Value Capture:
- 4.95% return on USDH.
- 4.75% Sky Savings Rate + 10bps integrator reward.
- $250M annual profits, projected to rise beyond $150M in buybacks.
Liquidity & Market Structure:
- Peg Stability Module with $2.2B instant USDC redemption.
- Multichain via @LayerZero_Core.
- $25M commitment to seed a Genesis Star on Hyperliquid.
Unique Edge:
Transparency, strong yield, and deep collateralization.
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…
— G | Ethena (@gdog97_) September 11, 2025
Ethena’s Proposal (Now Withdrawn)
Although Ethena’s proposal is off the table, its structure resembled @withAUSD:
- GENIUS compliant, globally licensed.
- Backed by Treasuries, repo, and cash.
- State Street and VanEck custody.
- $10M seeded liquidity.
- Cross-chain via LayerZero, with consumer rails through Rain, MoonPay, and EtherFi.
The withdrawal underscores Ethena’s focus on broader product innovation rather than competing in a stablecoin race already well-contested.
Ethena’s decision marks a pivotal moment in Hyperliquid’s journey toward a native stablecoin. By stepping aside, the team reinforced the ecosystem’s community-first ethos while reaffirming its own product-driven roadmap. The competition now narrows to AUSD and Sky, both bringing institutional credibility, strong liquidity structures, and long-term strategies.
For Hyperliquid, the real winner may not be a single stablecoin proposal, but the proof that community governance works—and that builders are willing to adapt when the collective speaks.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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