Ethena Labs Withdraws Bid for Hyperliquid’s USDH Stablecoin Amid Pushback - Here’s Why It Matters

Ethena Labs just pulled its USDH stablecoin proposal—and the crypto world is buzzing about what this means for DeFi's future.

Community resistance forced the retreat. Hyperliquid's governance community pushed back hard against Ethena's takeover bid for their native stablecoin. The backlash was immediate and decisive.

Stablecoin wars heat up. This withdrawal signals deeper tensions in the race for dollar-pegged dominance. Ethena's USDe now faces one less potential expansion avenue—while Hyperliquid maintains control over its monetary policy.

DeFi governance flexes its muscles. The episode proves that even well-funded projects can't bulldoze through community opposition. Sometimes the 'decentralized' part of finance actually works—much to traditional bankers' confusion.

Another day, another crypto drama that would give SEC lawyers hives. At least this time the adults actually talked before throwing money around.

Ethena Exits USDH Race After Community Flags Alignment Issues

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.

Trump-Backed GENIUS Act Boosts US Push for Dollar-Pegged Stablecoins

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.