Hyperliquid, a decentralized derivatives trading platform that processes at least $400 billion in trading volume, will launch its own stablecoin in 2025 as validators prepare to select a third-party issuer by September 14. The move threatens Circle's revenue stream from its USDC stablecoin, which currently powers 95% of trading pairs on the platform.
What to Know:
- Hyperliquid plans to launch USDH stablecoin through third-party issuer to redirect profits to HYPE token holders
- Circle dominates Hyperliquid trading with USDC but refuses to share reserve yields with the community
- CIRCL stock has fallen 60% from July highs as validators prepare September 14 vote on USDH issuer
Competition Heats Up in $290 Billion Stablecoin Market
The global stablecoin market exceeds $290 billion in total capitalization, according to Coingecko data. Tether's USDT commands nearly 50% market share with over $169 billion in circulation across Tron and Ethereum networks. Circle's USDC ranks second with more than $72 billion issued, maintaining significant presence on Solana and Hyperliquid platforms.
USDC serves as the preferred stablecoin for many traders due to its straightforward redemption process back to U.S. dollars. The token powers Hyperliquid's community-driven liquidity provision system, enabling the platform to handle billions in monthly trading volume. Circle issues USDC under U.S. regulatory compliance standards, with requirements further clarified by the GENIUS Act for stablecoin issuers tracking the dollar on major public blockchains.
Several companies compete to become Hyperliquid's chosen USDH issuer, including Paxos, which previously backed Binance's BUSD token.
Ethena, which recently partnered with Binance for its USDe stablecoin, also submitted a bid. Other contenders include Sky, a major decentralized money market player, along with Agora and Native Markets.
Polymarket betting data suggests Native Markets holds the strongest position to win the issuer selection. The competition reflects the lucrative nature of stablecoin operations, where issuers generate substantial profits from reserve yields on backing assets.
Circle Refuses Revenue Sharing as Competitors Offer Yield Splits
Circle CEO Jeremy Allaire announced on social media platform X that his company will not participate in the USDH issuer selection process. Instead, Circle plans to continue promoting USDC adoption within what Allaire called the "HYPE ecosystem." The CEO stated Circle intends to become "a major player and contributor to the ecosystem" while maintaining its current business model.
The refusal stems from Circle's unwillingness to share reserve yields with Hyperliquid's community, a practice that competing issuers have embraced. Companies like Agora, Paxos, Ethena, Sky, and Frax promise to channel portions of their reserve yields back to HYPE token holders or fund community development initiatives.
Circle argues it will integrate USDC natively into Hyperliquid's layer-1 infrastructure, eliminating bridging costs from Arbitrum while refusing profit-sharing arrangements. Any attempt to redirect revenue to Hyperliquid would directly impact CIRCL shareholders, according to company positioning.
The standoff highlights fundamental differences in business philosophy between traditional centralized issuers and newer competitors willing to sacrifice margins for market penetration. Circle's regulatory compliance and established liquidity provide advantages, but its inflexibility on revenue sharing creates vulnerability in competitive markets.
Stock Pressure Mounts as Federal Rate Cuts Loom
CIRCL stock has declined 60% from July highs, trading below previous support levels as of September 10. The stock faces additional pressure from multiple directions, including potential Federal Reserve rate cuts that would reduce yields on Treasury securities and bonds backing USDC reserves.
If Hyperliquid traders migrate from USDC to USDH following the September 14 validator decision, Circle's profitability could contract rapidly. The scenario becomes more problematic considering the broader interest rate environment, where lower rates directly reduce stablecoin issuer margins.
Market analysts suggest CIRCL stock could fall below $100 if the Hyperliquid situation deteriorates further.
The platform's $400 billion trading volume represents significant revenue potential for whichever stablecoin captures dominant market share.
Trading data shows increased volatility in CIRCL shares as investors weigh the potential impact of losing Hyperliquid market share. The stock's performance reflects broader concerns about competitive pressures in the stablecoin industry, where new entrants challenge established players through innovative revenue-sharing models.
Understanding Key Financial Terms
Stablecoins represent digital tokens designed to maintain stable value relative to reference assets, typically the U.S. dollar. Issuers generate revenue by investing backing reserves in interest-bearing instruments like Treasury securities. Reserve yields refer to profits earned from these investments, which traditional issuers retain rather than sharing with token holders or platform communities.
Layer-1 integration means building stablecoin functionality directly into a blockchain's base protocol, eliminating the need for bridging mechanisms that add costs and complexity. Validators serve as network participants who verify transactions and, in Hyperliquid's case, vote on governance decisions including issuer selection.
Closing Thoughts
The September 14 validator vote represents a pivotal moment for both Hyperliquid and Circle, with billions in potential revenue at stake. Circle's refusal to adapt its business model to community-focused revenue sharing may cost the company its dominant position on one of cryptocurrency's largest trading platforms.