Circle Chief Economist Interview: USDC's Entry into Hyperliquid Benefits Circle and HYPE

Compiled & Translated: Odaily TechFlow

Guests: Gordon Liao (Chief Economist, Circle), Ram Ahluwalia (Co-founder & CEO, Lumida Wealth), Chris Perkins (Managing Partner, CoinFund)

Host: Austin Campbell

Original Title: The Fed, China, and CLARITY + Coinbase Eats USDH

Podcast Source: Unchained

Air Date: May 19, 2026

Editor's Introduction

In this episode, Circle Chief Economist Gordon Liao systematically explains for the first time the market structure logic behind USDH being replaced by USDC. USDC balances on the Hyperliquid platform have doubled over the past year, with 90% of reserve yield flowing back to Hyperliquid for HYPE buybacks. Coinbase acts as the treasury deployer, Circle as the technical deployer, staking 500,000 HYPE.

Gordon also breaks down long-end Treasury yields. The current 30-year yield breaking above 5% is primarily driven by the term premium. Meanwhile, stablecoins are quietly becoming marginal buyers of Treasuries. In Q1 2026, USDC alone settled $21 trillion on-chain. Stablecoins' concentrated purchases of short-term Treasuries effectively lower the overall weighted duration of US government debt, potentially providing counter-balancing support for long-end rates.

Additionally, the episode's assessment of the CLARITY Act's bottlenecks and the divergence of opinions on where AI value accrues after the OpenAI lawsuit are worth noting.

Key Quotes

USDH Replaced by USDC

• "This is essentially a liquidity supernova event. As the dominant on-chain perpetual exchange, the collateral assets it uses will radiate throughout the entire on-chain economy."
• "The governance vote eight or nine months ago selected a different reference asset. But as the platform grows and matures, it also needs to deal with more traditional institutions, and using high-quality, institutional-grade collateral assets is a key part of that."
• "Anywhere that can lock up TVL — exchanges, prediction markets — will find a way to monetize this floating rate. Why should they give this money to a third party?"
• "For Coinbase and Circle, this is a strategic move to neutralize an emerging competitor. Coinbase, as the collateral manager, has inserted itself into a key node of this new infrastructure."

The Multi-Faceted Nature of Stablecoins

• "Regarding whether stablecoins are a medium of exchange or a store of value, we see they can be multiple things simultaneously. In payment scenarios, they are a medium of exchange; in this scenario, they are a vehicle for capital liquidity and collateral liquidity. As the system scales and becomes more institutionalized, the latter will become increasingly important."
• "An Agent would probably want a money market fund that pays interest on idle cash, but the moment it needs to make a payment, it will want that money packaged as a stablecoin. Just the compliance paperwork for paying with securities is unbearable."

OpenAI Case & AI Value Capture

• "There's almost no value capture at the LLM layer. These AI Labs spend tens of billions of dollars providing free services to people like us; they are essentially doing public service. The value of an LLM lies in its model weights; that's called IP."
• "Whoever controls the end user delivers the most value. Value primarily falls on the application layer, as well as cloud businesses and AI implementation service providers, like Accenture; they will do well."
• "I think it's a barbell structure. Besides the distribution side, the other end is energy. Whoever can get hold of nearly free energy and cheap computing power wins. Elon has an advantage here."

On the CLARITY Act

• "The compromise from Thom Tillis and Angela Alsobrooks essentially separates the store of value function, settlement function, and unit of account function of money."
• "We are approaching the 'Hillary Step' of this mountain. There are still the committee seat issue and the ethics issue; the ethics hurdle will be very difficult to pass."
• "I've thought the banking industry's fight was very Don Quixote-like from the start. What exactly are you trying to get out of this? Are you just stabbing each other, or are you handing a great gift to asset management companies?"

Long-Term Treasuries & Interest Rates

• "Most of the upward pressure on the 30-year yield comes from the term premium, which is now around 80 bps, quite high compared to when it was negative two years ago. This means the market reflects supply and demand dynamics, not expectations for future short-term rates."
• "The narrative that stablecoins are marginal buyers of Treasuries has more substance than people give it credit for. Their duration is very short, concentrated in T-bills and reverse repos. This effectively frees up space for the Treasury to issue more short-term debt. In dollar-duration weighted terms, it actually reduces the supply of long-term debt in the market."
• "Investors are saying: I need more compensation to hedge against greater inflation risk. That's it. They know the Fed is not inclined to cut rates."

Coinbase and Circle Team Up to Take USDH

Austin Campbell (Host): Hello everyone, welcome to Bits + Bips, where we explore how crypto and macro collide, measured in basis points. I'm your host, Austin Campbell. Today's guests are Ram Ahluwalia, Co-founder & CEO of Lumida Wealth; Chris Perkins, Managing Partner at CoinFund; and Gordon Liao, Chief Economist at Circle. There's a lot to discuss in the rate markets and the news today, and I'm particularly looking forward to Gordon's perspective.

Let's start with Circle. Coinbase and Circle have essentially eaten USDH. USDC will be crowned the quoting asset aligned with Hyperliquid (the on-chain perpetual DEX). Native Markets, which won the governance competition eight months ago, has now been acquired by Coinbase. USDH holders will redeem their tokens for USDC during a migration period. Coinbase will become the official reserve fund manager/deployment partner for USDC on Hyperliquid. Circle will handle the technical access and operational infrastructure for USDC on Hyperliquid and stake 500,000 HYPE tokens towards becoming a validator. 90% of the reserve yield will flow back to Hyperliquid, presumably for HYPE buybacks through the aid fund.

Roughly speaking, there's about $5 billion USDC on Hyperliquid now. At just under 4% yield, that's nearly $200 million annualized. Most of this money will go to Hyperliquid, Coinbase takes a cut, and Circle gets a new USDC deployment frontier, continuing its pursuit of Tether's scale.

The bullish logic is deeper order books, less conversion friction, faster deposits/withdrawals, and better market maker support. HYPE is tied to platform fees, staking, and Builder activity. Bitwise is also applying for a spot HYPE ETF. Bears, like ZachXBT, worry that if Hyperliquid's core collateral, quoting asset, and liquidity become increasingly dependent on USDC, the whole system gives a critical vulnerability to Circle/Coinbase/regulatory mandates. There's also the governance issue with Native Markets. Chris, as an investor in this space, what's your take?

Chris Perkins: I think this is one of a series of moves we're going to see, centered on a term called "net interest income." If you step back and look at the traditional model for exchanges: you earn ticket fees, taking a piece of every transaction. Usually, clearing isn't massively profitable, though in crypto it's become a new business line, sometimes earning from data. But the real big money is net interest income.

In traditional finance, the way it works is: a customer gives you dollars as collateral; you give those dollars to the clearinghouse; the clearinghouse invests them, keeps a big chunk, and gives you a small piece back. That's your net interest margin. It's a fundamental part of the business model for any exchange. Many decentralized applications have ignored this, essentially giving away this beautiful income stream for free. Now they're realizing it and want to take it back.

I can tell you, anywhere that can lock up TVL — exchanges, applications, prediction markets — will find a way to monetize that floating rate. Why should they give it to a third party?

If you stand in the shoes of the exchange, this is the bullish narrative – Hyperliquid's token went up after the news because this "circle" (pun intended) is closed. You solved the net interest income problem, and it flows back to token holders. If you stand on the Circle/Coinbase side, you also win – the details are in the contracts, like peg duration, how often rates are renegotiated, I don't know if Gordon can share. But what you get is ubiquitous stablecoin usage. USDC is fungible; the more it circulates, the higher the likelihood end-users adopt it as a payment method.

So USDC wins too. Maybe both sides will adjust the economic terms in the future. Hyperliquid is a big winner, securing net interest income; Circle gets greater adoption, more volume, broader distribution, and hopefully incremental utility. I see this as a win-win.

Austin Campbell: Gordon, I want to toss the ball to you. I know Circle well myself. USDC has many different facets in the current market. From a market structure perspective, Americans are used to thinking of money in layers – the money you use to buy coffee isn't the same as the money you use to settle derivatives. But now, we're starting to see USDC used for many things simultaneously; its fungibility is increasing. How do you see this from Circle's perspective? And zooming out to the market structure through your economic lens?

Gordon Liao: A few observations. First, we're witnessing the overall maturation of the infrastructure. Hyperliquid is the dominant on-chain perp platform today, and its scale has grown significantly. USDC balances on that platform have roughly doubled year-over-year.

The governance vote about eight or nine months ago did select a different reference asset. But as the platform grows and matures, it also needs to interact with more traditional institutions. Using high-quality, institutional-grade collateral assets is a key part of that. Choosing USDC is a recognition of its underlying security and its commitment to 1:1 reserves.

As Chris said, this is a win-win and a liquidity supernova event. As the dominant on-chain perp platform, the collateral assets it uses will radiate throughout the entire on-chain economy. So, this is a major liquidity event that will encourage the use of USDC and the other infrastructure associated with it.

We deployed USDC to Hyperliquid last September, along with CCTP (Cross-Chain Transfer Protocol). So it's been there for a while, but this is a great "reconfirmation" event.

Regarding whether stablecoins are a medium of exchange or a store of value, we see they can be multiple things at once. In some scenarios, they are a medium of exchange for payments; in others, they are a vehicle for capital liquidity and collateral liquidity. As the system scales and becomes more institutionalized, the latter will become increasingly important.

We see a similar trend in settlement volumes. Our recent earnings report disclosed that USDC on-chain settlement volume in Q1 was $21 trillion. This reflects the expansion of the infrastructure and improving liquidity on the largest platforms – both centralized and decentralized.

Austin Campbell: Following that line, USDC's circulation is actually highly tied to Coinbase. Coinbase has many products built on USDC, like debit cards, credit card payments, and corporate payments. Now we're using it as core collateral for exchanges like Hyperliquid. Ram, from a market perspective, does this make you more bullish or bearish on Coinbase and Circle's stock?

Ram Ahluwalia: It's positive for everyone, especially Hyperliquid. For Coinbase and Circle, they have successfully neutralized an emerging competitor. Coinbase inserting itself as the collateral manager at a key node of the new infrastructure is a very strategic move.

For Hyperliquid, keeping 90% of the revenue is the reward for its achievements over the past few years. We discussed Hyperliquid about three or four weeks ago; it's one of the assets you want to hold this cycle. Coinbase moving proactively was very forward-looking, because Hyperliquid is becoming the core of decentralized trading venues. Circle gets a substantial stream of recurring net interest income. So it's a win for everyone involved, but the benefit is particularly significant for Hyperliquid.

This brings us back to another topic we've discussed before: distribution will ultimately drive most of the value in this system. Gordon, you also mentioned that Hyperliquid is an emerging perp DEX in crypto. All these parties coming together is essentially an acknowledgment of the position of distribution and users. This theme will recur when judging winners and losers down the line.

The OpenAI Lawsuit

Austin Campbell: Speaking of users and winners, today Elon Musk lost and Sam Altman won, at least in the first round. A federal jury in Oakland unanimously rejected all of Musk's claims in under two hours. The core of the decision was the three-year statute of limitations; the jury believed Musk knew OpenAI was converting to a for-profit model in 2021, but he didn't sue until February 2024.

He was originally seeking $134 billion in "ill-gotten gains" and the removal of Altman and Brockman from leadership, citing the 2025 for-profit restructuring. But the substantive issues of the case, including breach of charitable trust and unjust enrichment, were not adjudicated. Musk's team has said they will appeal. Wired magazine commented that both sides portrayed each other as self-interested during the trial; neither Musk nor Altman looked good. The subsequent interpretation is that, at least in the interim, OpenAI might be able to go for an IPO.

There are a few noteworthy reactions on X. Structural skeptics say that legally this is a big win for OpenAI, but the larger political and institutional questions remain untouched – what does it mean for an organization to build public legitimacy with a "non-profit, humanity-first" mission and then become one of the most valuable commercial platforms in the world? News24 says a non-profit machine built for the benefit of humanity has been forcibly turned into a closed, Microsoft-backed for-profit machine. The trial did reveal broken promises around openness and security. Chris, what's your take?

Chris Perkins: It seems like the statute of limitations expired, which is pretty straightforward. I don't know how Musk's lawyers will appeal, but they're smart and will surely find a way.

At this point, Ram usually has something negative to say about OpenAI; he might call it much ado about nothing. Before he goes, the bigger picture question in crypto is that due to regulatory pressures over the past four years, many foundations have been structured as non-profits, often alongside Labs. I hope for a clear legal precedent that can clarify the relationship between foundations and Labs. Right now, in many protocols, everyone is confused about who is responsible for what and who is who.

I'm not saying foundations are useless; foundations absolutely have non-profit ideals they can advance, like cryptographic research at Ethereum. But many foundations were likely formed out of a motivation to seek protection from a very aggressive regulator. So this case will have profound implications for the crypto space. Sam is also increasingly involved in this ecosystem.

Ram Ahluwalia: Chris, you practically fed that to me. I didn't expect this case to amount to much, so indeed, nothing happened, and it was much ado about nothing.