Ethena Labs has withdrawn its proposal to issue Hyperliquid's native stablecoin, USDH, after facing community pushback. This decision significantly boosts the chances of Native Markets, led by Hyperliquid advocate Max Fiege, in the competitive race to control USDH. Hyperliquid's validators are scheduled to vote on the matter on September 14.

The competition to issue USDH has been intense, with several DeFi projects vying for the role, including Paxos, Frax, Agora, and Sky (formerly MakerDAO). Hyperliquid, a leading decentralized derivatives exchange, is preparing to launch USDH as its native stablecoin. The exchange processed approximately $400 billion in perpetuals trading volume in August, highlighting the high stakes involved. The winning issuer will gain access to a substantial stablecoin liquidity base.

Ethena's initial proposal involved backing USDH with USDtb, a stablecoin collateralized by BlackRock's tokenized money market fund, BUIDL. They also pledged to return 95% of the net revenue from USDH reserves to the Hyperliquid ecosystem and cover the costs of migrating existing USDC trading pairs to USDH. Furthermore, Ethena had earmarked $75 million in incentives, with the potential to expand to $150 million, to support market development.

Native Markets' initial proposal involved issuing USDH via Stripe's stablecoin payment processor, Bridge. However, this plan faced considerable opposition from the Hyperliquid community.

Ethena's ambitions extended beyond simply issuing USDH, with plans for hUSDe, a Hyperliquid-native synthetic dollar product building on its existing USDe model. USDe recently hit a $12 billion market cap in August, becoming the fastest digital dollar to reach this milestone.

Hyperliquid's native token, HYPE, has seen a price increase since the announcement of the USDH race. As the September 14 vote approaches, the decision of Hyperliquid's validators will likely shape the future of USDH and Hyperliquid's growth within the DeFi ecosystem.