Stablecoin issuers Paxos, Frax Finance, and Agora are jockeying to win the bid to issue Hyperliquid's upcoming USDH stablecoin, announced in a Friday Discord post from the trading firm.

Hyperliquid said it's seeking to launch a "Hyperliquid-first, Hyperliquid-aligned, and compliant USD stablecoin" and had reserved the USDH ticker for that purpose. Hyperliquid invited teams to submit proposals with the winner, chosen by validator vote, to gain approval to purchase the ticker and issue the token.

Hyperliquid is known for its decentralized ethos, shirking venture capital funding and launching its $HYPE token directly on public markets. The perpetuals exchange leads its competitors in terms of trade volume, according to The Block's data. Most pairs on the exchange use the USDC stablecoin, and Hyperliquid holds nearly $5.5 billion in USDC deposits on the platform, around 7.5% of that stablecoin's circulating supply, according to DeFiLlama data.

One bid came from Paxos, the stablecoin issuer active since 2018, which said its recently formed Paxos Labs team would handle USDH. Paxos Labs was formed in June to accelerate stablecoin adoption in decentralized venues, and has since acquired the team behind the loopedHYPE token as part of the effort.

In its USDH bid, Paxos Labs offered MiCA and GENIUS Act compliance, native deployment on both HyperEVM and HyperCore, and a significant revenue share, with 95% of interest going towards HYPE buybacks, redistributing the tokens to "ecosystem initiatives, partners and users."

"Additionally we plan to add support for HYPE as an asset within Paxos’s brokerage infrastructure which powers crypto trading for platforms such as PayPal, Venmo, MercadoLibre, Nubank, Interactive Brokers and many others," Paxos Labs wrote in its bid. Paxos has launched stablecoins for Paypal and Binance, though it reached a $48.5 million settlement with a New York regulator over the launch of the latter token.

Paxos Labs co-founder Jun Kim also said the transition from USDC to USDH would be zero-fee in a follow-up Discord message. "The first step would be to seed AMM liquidity between USDC <> USDH and potentially other tokens to bootstrap direct onchain liquidity," Kim wrote. "Paxos is committed to providing this initial AMM liquidity and incentives for others to do so as well."

Frax, which launched the frxUSD stablecoin towards the beginning of the year, proposed to give USDH a 1:1 backing with frxUSD, which itself is backed by BlackRock's yield-bearing BUIDL onchain treasury fund. Under Frax's proposal, "100% of the underlying Treasury yield [would be] forwarded programmatically onchain to Hyperliquid users with zero Frax take rate," Frax's core team wrote.

Frax framed the proposal as "community-first," with "smooth mint/redeem across frxUSD, USDC, USDT, and fiat," and compliance with the GENIUS standard. With 4% APR from treasuries, Frax said Hyperliquid's current stablecoin deposits could bring in $220 million in annual yield revenue.

"We're not interested in having manipulation powers over USDH, just supplying the underlying stablecoin infrastructure," Frax said. "All of our infrastructure is built around frxUSD which is what makes it easier to use as backing. USDH would inherit all of this functionality, multichain presence, mint/redeem capabilities, compliance, as well as future features such as card spending."

The final major bid, as of publishing time, comes from stablecoin builder Agora, which recently raised $50 million in a Series A round and launched a white-labeled stablecoin product. Agora's AUSD stablecoin, which carries a market cap of roughly $130 million, is backed 1-for-1 by cash and short-term U.S. Treasurys held in a segregated reserve administered by State Street and VanEck.

Agora formed a coalition for its bid, promising its USDH would "be powered by Agora’s institutional stablecoin infrastructure, Rain’s global card & on/offramp coverage, and LayerZero’s interoperability." Agora pledged to share "100% of net revenue" with Hyperliquid, to be distributed to the platform's Assistance Fund or to be put toward HYPE token buybacks.

"USDH will be a Hyperliquid-native stablecoin, not a redeployed token from another ecosystem," Agora CEO and co-founder Nick van Eck, son of Van Eck CEO Jan van Eck, wrote in his proposal. "Agora is a neutral issuer, without its own settlement network, brokerage (eg. Paxos), or chain, and does not compete with the broader HyperLiquid ecosystem."

The "net revenue" would be USDH's total revenue minus a fee from its custodian, which would be State Street, which takes a few basis points, van Eck clarified on X. The proposal also says the stablecoin would be built with "Genius-compliant structure."

It's likely that other stablecoin issuers will submit bids in the coming days. Ethena Labs, which issues the world's third-largest stablecoin by circulating supply, hinted on X that the firm may submit a USDH bid. Of the bids submitted so far, the Paxos Labs bid has received the most discussion on Hyperliquid's Discord server.

Hyperliquid asked firms to submit proposals by Wednesday, September 10, with the vote to follow on Sunday, September 14. The Hyperliquid Foundation will "effectively abstain" from the vote, the team said.

"Hyperliquid’s native financial primitives and general programmability comprise a chain uniquely optimized for stablecoin issuance and payments," the Foundation wrote, but noted that USDH will not be the exclusive stablecoin on Hyperliquid. "There will continue to be multiple stablecoins on the Hyperliquid blockchain and new stablecoin teams who join the Hyperliquid ecosystem."