Six months ago, Circle lost the stablecoin bid on Hyperliquid. Six months later, Circle and Coinbase voluntarily staked HYPE and pledged to transfer 90% of the reserve yield from USDC on Hyperliquid to the protocol, in exchange for USDC’s status as a “aligned quote asset.”
USDH is retiring; USDC is taking its place.
Over the past 24 hours, Hyperliquid, Coinbase, and Native Markets each released announcements.
Hyperliquid has implemented AQAv2 rules. USDC is now the sole aligned quote asset, with Coinbase serving as the "treasury deployer," returning the majority of USDC reserve yields to the protocol treasury; Circle serves as the "technical deployer," responsible for CCTP cross-chain transfers and native issuance infrastructure. Both parties have staked 500k HYPE as performance collateral, and if the treasury deployer’s address fails to generate sufficient yields to cover costs, the staked HYPE will be slashed. Future HIP-4 prediction markets and perpetual contract markets operated by validators will require USDC as the mandatory quote asset.
Coinbase officially confirmed a significant increase in its HYPE staking position. Native Markets sold its USDH-branded assets to Coinbase under agreed terms, leading to the gradual wind-down of the USDH market; existing holdings can still be redeemed at face value from the issuer, Bridge. Native Markets founder @fiege_max called this "Hyperliquid's biggest win to date."
Originally, Circle held all the reserves for USDC circulating on Hyperliquid and used them to purchase U.S. Treasury bills to earn interest. Now, Coinbase has taken over the management of Hyperliquid’s USDC and redirects approximately 90% of the income into Hyperliquid’s auxiliary fund to repurchase and burn HYPE tokens.
In September last year, Hyperliquid publicly auctioned its aligned stablecoin, with Circle and the startup team Native Markets competing; Native Markets won and launched USDH, with approximately 50% of USDH’s reserve yield flowing to Hyperliquid’s auxiliary fund.
The market and users haven’t embraced USDH.
The supply of USDH on Hyperliquid is approximately $102 million, while USDC reaches $5.08 billion. The former contributes an annualized yield of about $1.6 million to the auxiliary fund, whereas the latter contributes $0.
Hyperliquid's crypto perpetual contracts are always priced in USDC, making it the platform's largest trading segment. Among HIP-3 deployers, Trade[XYZ], which accounts for approximately 94% of the entire segment's trading volume, has also chosen USDC as its quote asset. A few HIP-3 exchanges using USDH, such as Markets and Felix, have long faced execution costs due to liquidity fragmentation, and retail users also experience a clunky process when swapping between USDH and USDC.
In addition, Hyperliquid’s newly launched prediction market, HIP-4, has also adopted USDH as its quote asset, inheriting liquidity fragmentation from day one.
Continuing to push USDH is strategically self-limiting; abandoning USDH would render the September auction and six months of effort by Native Markets meaningless. Hyperliquid found a third path: getting Circle and Coinbase to align USDC as an asset and capture the $5 billion in profits already sitting on the platform.
In September, Circle did not acquire USDH. This time, it didn't wait.
One additional detail: On February 16 of this year, Hyperliquid hired Sterling_hl, former head of on-chain business at Circle, as BD. Three months later, Coinbase and Circle sat at the same table.
The net beneficiaries of this partnership also include previous HIP-3 exchanges that used USDH. Kinetiq’s Markets has issued a statement confirming a seamless migration to USDC, and Felix founder @0xBroze has also expressed acceptance of this outcome. Both platforms have long struggled with the dual-system challenge of USDH-USDC across margin trading, liquidity depth, and user experience—and now they are finally unified under a single liquidity pool.
Applications integrated with USDH on HyperEVM will simultaneously enter the migration period.
Two HIP-3 deployers not using USDH became among the few losers. Dreamcash uses USDT0 as its quote asset, while HyENA uses USDe. Hyperliquid’s documentation explicitly states that future HIP-4 prediction markets and contract markets operated by validators must adopt aligned quote assets; for these two exchanges to advance to the next stage, they must require Tether and Ethena to accept the same stringent 90% reserve yield split.
Let’s examine the impact of this partnership on HYPE by reviewing a set of data comparisons.
During the USDH era, Hyperliquid generated approximately $1.6 million annually from its stablecoin business. Assuming USDC’s outstanding balance on Hyperliquid remains at $5 billion and a 3.5% Treasury yield, Hyperliquid’s annualized revenue from its stablecoin business would range between $137 million and $160 million.
The increase is nearly a hundredfold.
This money will not be distributed as dividends but will be fully used to repurchase and burn HYPE under Hyperliquid’s current mechanism. The additional annualized revenue of $140 million to $160 million equates to approximately $400,000 more in daily repurchases; Hyperliquid currently repurchases about $1.5 million per day, representing an immediate increase of 26%.
More notably, there has been a structural shift in Hyperliquid's revenue composition.
Hyperliquid previously derived almost all of its revenue from trading fees, making it a classic traffic-driven business. It now has an additional cash flow stream based on deposit volume, which exhibits significantly lower volatility than trading volume. During this downturn, Hyperliquid’s stablecoin deposits declined by only 15% from their historical high, while monthly trading volume dropped by 55% over the same period. The platform’s resilience to market cycles has been substantially enhanced.
In addition, Coinbase and Circle will each stake 500k HYPE, representing direct buying pressure.
Putting USDC into Hyperliquid is like putting Coinbase and Circle into Hyperliquid.
Hyperliquid is an offshore-registered PerpDEX that has long operated in a regulatory gray area under U.S. oversight over the past two years. Coinbase is the largest U.S.-listed compliant cryptocurrency exchange, and Circle is the largest stablecoin issuer under the U.S. regulatory framework. The simultaneous staking of HYPE by both U.S. compliance leaders, along with their business-level integration, represents a systemic upgrade to Hyperliquid’s compliance narrative.
The CLARITY Bill is currently under review by the U.S. Senate, and the market assesses its chances of passage as high. If enacted, the bill will redefine the legal boundaries and liability entities for DeFi protocols, partially narrowing the protective umbrella of offshore structures. In this window of opportunity, deeply aligning with two compliance leaders is equivalent to purchasing insurance ahead of regulatory developments.
The founder of Native Markets wrote in their farewell statement that this partnership aligned the protocol with "the strongest voices in U.S. crypto policy." This is not empty rhetoric.
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