USDC launches counterattack on USDT, the real battlefield is on Hyperliquid

Original title: How USDC Wins the Hyperliquid Deal

Original author: David Christopher

Original translation: Peggy

Editor's note: The stablecoin competition is shifting from "who is more compliant" to "who can secure more trading on-ramps."

Since the passage of the GENIUS Act, USDC has indeed gained new growth momentum. Circle's US-based background and compliance advantages have allowed USDC to catch up with and even periodically surpass USDT in trading volumes. However, from a market share perspective, the landscape hasn't changed significantly: USDT still holds the majority of the stablecoin market and maintains a strong position in markets outside the United States.

This is also the core significance of the deal between Coinbase, Circle, and Hyperliquid. On the surface, it's a stablecoin asset swap: USDC is reinstated as Hyperliquid's primary quote asset, and Hyperliquid receives a higher revenue share. But at a deeper level, it's a battle over distribution channels.

Hyperliquid is a core platform in the on-chain perpetuals market, and perpetuals naturally rely on stablecoins as quote and settlement assets. Whoever becomes the primary quote asset in these markets will gain more long-term use cases from trading volumes, margin, deposits, withdrawals, and on-chain activity. Tether has already proven this path through Binance; USDT's strength isn't just due to its issuance size, but also because it's deeply embedded in the global trading system.

For Coinbase and Circle, Hyperliquid offers global reach that they themselves find difficult to replicate. Coinbase is restricted by regulations and cannot cover as broad a market as Binance or Hyperliquid. Therefore, embedding USDC into Hyperliquid's trading infrastructure might be a practical path for them to counter USDT's network effects.

What's most noteworthy about this article isn't whether Coinbase conceded profits, or how much revenue share Hyperliquid obtained, but that USDC is attempting to transform from an "American compliant stablecoin" into a broader "on-chain base trading currency." As perpetuals continue to grow, the main battlefield of the stablecoin war may increasingly concentrate in these high-frequency trading scenarios.

The following is the original text:

Tether still dominates Binance, but Coinbase just plugged USDC back into Hyperliquid. The battle for stablecoin distribution channels is becoming increasingly fierce.

Hyperliquid is becoming one of the most contested assets in the crypto industry right now. Last week, spot HYPE ETFs launched by 21Shares and Bitwise went live on US trading platforms, with Grayscale and VanEck following suit. Behind this influx of institutional capital is a longer-running competition: who can get a share of this trading platform's economic benefits.

Last fall, Hyperliquid issued a public RFP soliciting proposals for its native stablecoin, USDH, aiming to recapture the revenues previously flowing to Coinbase and Circle. At the time, approximately $5.6 billion in USDC was held in Hyperliquid's cross-chain bridge, generating about $200 million in annual interest income, but those revenues flowed to its centralized competitors. The platform actually creating the demand wasn't benefiting from it. Ultimately, Native Markets defeated bidders like Paxos and Ethena in a community vote, and USDH was subsequently launched.

Bankless previously reported on Hyperliquid's bidding war over USDH.

But just last week, Native Markets sold USDH to Coinbase and agreed to phase out this stablecoin tied to Hyperliquid's interests, allowing USDC to once again become the trading platform's primary quote asset. In exchange, 90% of the related revenues will flow back to Hyperliquid, although the specific revenue capture mechanism remains unclear. The deal is widely interpreted as a victory for Hyperliquid, with the cost borne by Coinbase and Circle. This interpretation is understandable, but not entirely accurate.

What Hyperliquid gains from this deal is clear: a significantly improved revenue share, roughly double that under the USDH model; stronger regulatory resources through an alliance with one of the most influential voices for the US crypto industry in Washington; and a return to a stablecoin experience the platform originally built around, one that users already highly trust. Especially in the HIP-3 market, which has driven substantial attention to Hyperliquid over the past six months or so, USDC remains the primarily used asset.

From Coinbase and Circle's perspective, the deal is often seen externally as a public relations boost: they've forged a closer relationship with one of the most crypto-native and successful projects of the last cycle. However, if you look at USDC's current market position alongside the growth trajectory of the perpetuals market, another beneficiary emerges.

What Coinbase and Circle truly secured is a distribution channel for USDC. And this scalable distribution may be more important than any other aspect of this deal.

Home Court Performance?

Since the passage of the GENIUS Act, USDC has indeed shown strong growth momentum. Circle was already prepared for the new environment shaped by this regulatory framework: USDC is headquartered in the US and has always been compliance-focused. This positioning has translated into real trading volume.

Allium data shows that in May 2026, USDC trading volume reached $355 billion, surpassing USDT for the first time in recent months, also reflecting accelerating growth since the GENIUS Act's passage last July.

But the structural landscape of the stablecoin market hasn't changed.

In April 2025, just before the GENIUS Act's passage, USDT held 67% of the stablecoin market share, with USDC at 27.6%. One year later, USDT's share was 67.3%, and USDC's was 28.1%. The change was only half a percentage point for both. In other words, while USDC's trading volume is accelerating, its supply share has barely moved.

A report from Artemis last October indicated that the US is USDC's strongest market. Given the correlation between USDC's growth post-GENIUS Act and the US regulatory environment, it's relatively safe to conclude that the US is also the primary source of USDC's growth.

But the problem is precisely that the US is also the market facing the most concentrated influx of new competitors. Stripe has clearly entered the stablecoin business through Tempo and other acquisitions; major financial institutions are also launching their own domestic stablecoins compliant with the GENIUS Act. They are all encroaching on USDC's core market.

If the squeeze in the domestic US market intensifies further, USDC lacks a sufficiently solid base overseas to fall back on. In virtually every market outside the US, USDT remains the default dollar stablecoin, widely used for savings, investment, and trading, and it continues to aggressively expand. Over the past year, several new chains have been launched specifically to broaden USDT distribution; simultaneously, Tether launched USAT, aiming to enter the boundaries of US regulatory oversight under the GENIUS Act framework and directly challenge USDC's home market.

Coinbase and Circle do have momentum for continued expansion now, but the window to lock in distribution channels before competition fully heats up is narrow. Trading scenarios, particularly the perpetuals market, are precisely where it's most advantageous to compete for this distribution on-ramp.

Bankless previously reported on Tether launching the US-regulated USA₮ stablecoin.

Perpetuals Are the Real Battleground

Like stablecoins, perpetuals are one of the fastest-growing segments in crypto, with year-over-year growth consistently in double or even triple digits.

Perpetuals and stablecoins are structurally highly integrated, as stablecoins are typically the primary quote asset in perpetual markets. USDT has already secured a significant position here: on Binance, the world's largest perpetuals trading platform, most trading markets use USDT as the primary quote asset. Any user trading Binance's core markets primarily does so via USDT. This further consolidates USDT's supply within the platform and naturally creates downstream pull for deposits, withdrawals, and on-chain activity related to that platform.

Although Hyperliquid's trading volume is far below Binance's, it is already the largest on-chain perpetuals trading platform, holding a 30% share of the entire on-chain perpetual market and commanding 46% of open interest. It has maintained this position despite repeated competitive challenges.

Meanwhile, while Hyperliquid is not a centralized exchange, it is clearly capable of competing with centralized platforms. As of April 30, its trading volume was roughly 50% of Bybit's, 30% of OKX's, and 79% of Coinbase International's. All of this combined represents only about 13% of Binance's volume. But the key point is that this number is still growing, and the growth curve points in only one direction.

While still in its early stages, Hyperliquid's dominance in on-chain perpetuals, combined with its ability to rival and sometimes surpass centralized exchange volumes, gives it global reach approaching Binance's coverage in markets outside the US. This opens a new channel for Coinbase and Circle: they can use Hyperliquid to compete with Tether and turn it into a structural distribution channel for USDC.

Coinbase Chose Its Battlefield

However, this raises a question: why doesn't Coinbase simply develop its own perpetuals business further and build this distribution channel itself?

The reason is that Coinbase is constrained by the regulatory framework, limiting both the customer base it can serve and the number of markets it can list. Currently, Coinbase covers about 100 countries, slightly more than half of the 180 countries Binance covers. Hyperliquid, benefiting from a "looser" operating environment, can access a broader market, giving it an advantage over both Binance and Coinbase—an advantage Coinbase itself would find difficult to replicate.

Therefore, Coinbase and Circle choose to let Hyperliquid play the role of global reach, with USDC entering those markets as the underlying asset. This deal allows them to share in the upside through USDC supply growth and the resulting revenue, without having to directly engage in a jurisdictional battle they were unlikely to win. They only capture a portion of the economic benefits, but it's a scale Coinbase couldn't achieve on its own.

Tether is Replicating the Same Playbook

Tether is also running its own version, albeit on a much smaller scale. Following the Drift exploit in April, Tether committed up to $147.5 million to support its recovery. This deal made USDT the settlement asset for Drift, established Tether-backed USDT facilities for designated market makers, and funded a trading incentive layer.

In other words, Tether used Drift's crisis to change the base currency of a major Solana perpetuals DEX. Before this deal, USDC's stablecoin presence on Solana was more than double that of USDT, a pattern prevalent across the entire Solana chain.

Both sides of the stablecoin war have realized the same thing: the perpetuals market is a key battleground in the stablecoin competition.

Overall, to sustain the growth momentum from the GENIUS Act, Coinbase and Circle need more distribution channels. The Hyperliquid deal could be precisely such an on-ramp: spreading USDC into the core scenarios of on-chain trading, entering one of crypto's fastest-growing segments, and gaining the possibility to compete at scale with USDT and Binance.

This could also be a bet on further opening of US regulatory boundaries. CFTC Chairman Selig has explicitly stated his desire for perpetuals trading to be permitted in the US, and the passage of the CLARITY Act could potentially ensure this. Reports this week indicate that the SEC is preparing to offer an "innovation exemption" under its Project Crypto initiative, allowing crypto-native platforms to offer on-chain trading of tokenized US stocks under lighter registration requirements.

Combining the attitude of the CFTC under Selig's leadership with the regulatory direction of the SEC under Atkins' influence, Coinbase seems to be positioning itself ahead of time: enabling Hyperliquid to gain distribution capability in the US market with USDC already installed as the core asset.

Bankless previously reported on perpetuals trading entering its own window of opportunity.

Of course, the above remains speculative. But it does align with how Wall Street and institutional players might view Hyperliquid: it is their on-ramp into the future regulatory framework for perpetuals. For an asset, this is arguably one of the most attractive tailwinds available.

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