USDC counters USDT, the real battleground is Hyperliquid

Original Title: How USDC Wins the Hyperliquid Deal

Original Author: David Christopher

Original Translation: Peggy

Editor's Note: The stablecoin race is shifting from "who is more compliant" to "who can secure more on-chain transaction gateways."

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

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

Hyperliquid is a core platform in the on-chain perpetual contracts market, which inherently relies on stablecoins as quote and settlement assets. Whoever becomes the primary quote asset in these markets gains access to more trading volume, margin, deposits, withdrawals, and long-term usage scenarios driven by on-chain activity. Tether has proven this path through Binance; USDT's strength comes not just from its issuance scale, but from its deep embedding into the global trading system.

For Coinbase and Circle, Hyperliquid offers a global reach they themselves struggle to replicate. Coinbase is constrained by regulations, unable to cover as broad a market as Binance or Hyperliquid. Therefore, embedding USDC into Hyperliquid's trading infrastructure could be a realistic path to counter USDT's network effects.

The most noteworthy aspect of this article isn't whether Coinbase conceded profit or how much Hyperliquid gets, but that USDC is attempting to evolve from a "US-compliant stablecoin" into a broader "on-chain base trading currency." As perpetuals continue to grow, the main battleground for stablecoin wars may increasingly concentrate on 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 over stablecoin distribution channels is intensifying.

Hyperliquid is becoming one of the most contested assets in crypto right now. Last week, spot HYPE ETFs from 21Shares and Bitwise went live on US exchanges, with Grayscale and VanEck following suit. Behind this rush of institutional capital is a long-running race: who gets a piece of the exchange's economic returns.

Last fall, Hyperliquid issued a public RFP for its native stablecoin, USDH, aiming to claw back revenue that was flowing to Coinbase and Circle. At the time, approximately $5.6 billion worth of USDC was sitting in Hyperliquid's bridge, generating roughly $200 million in annual interest income, but that income went to its centralized competitors. The platform creating the demand wasn't capturing the value. Ultimately, Native Markets won the community vote against bidders like Paxos and Ethena, and USDH was launched.

Bankless previously covered Hyperliquid's bidding war over USDH.

But just last week, Native Markets sold USDH to Coinbase and agreed to phase out the stablecoin tied to Hyperliquid's interests, allowing USDC to become the exchange's primary quote asset again. In exchange, 90% of the related revenue flows back to Hyperliquid, though the specific revenue capture mechanism remains unclear. The deal is widely seen as a victory for Hyperliquid, with Coinbase and Circle footing the bill. This interpretation is understandable, but inaccurate.

What Hyperliquid gets from this deal is clear: a significantly improved revenue share, roughly double that of the USDH model; stronger regulatory resources by allying with one of the most influential voices in Washington for the US crypto industry; and a return to the stablecoin experience the exchange was built around and which users highly trust. Notably, in the HIP-3 markets that have drawn significant attention to Hyperliquid over the past six months or so, USDC remains the primary asset used.

From Coinbase and Circle's perspective, the deal is largely seen as a branding win: it ties them more closely to one of the most crypto-native and successful projects of the last cycle. But when you overlay USDC's current market position with the growth trajectory of the perpetuals market, another beneficiary emerges.

What Coinbase and Circle truly gained is a distribution channel for USDC. And this scaled distribution could be more important than any other aspect of the deal.

How's the Home Field Looking?

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 prioritized compliance. 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 accelerated 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, with USDC at 27.6%. A year later, USDT's share was 67.3%, and USDC's was 28.1%. The change is barely half a percentage point. In other words, while USDC's transaction volume is accelerating, its supply share has hardly budged.

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

But the problem is precisely that the US is also the market seeing the biggest 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 US domestic market intensifies, USDC lacks a sufficiently solid base overseas to fall back on. In almost every market outside the US, USDT remains the default dollar stablecoin, widely used for savings, investments, and trading, and it continues to expand aggressively. Over the past year, multiple new chains have been launched specifically to broaden USDT distribution; simultaneously, Tether launched USAT, attempting to enter the US regulatory perimeter under the GENIUS Act compliance framework, directly challenging USDC's home market.

Coinbase and Circle do have momentum for continued expansion now, but their window to lock down distribution channels before competition fully heats up is narrow. Trading venues, especially the perpetuals market, are where this distribution gateway is most worth fighting for.

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 categories in crypto, consistently posting double-digit or triple-digit year-over-year growth.

Perpetuals are structurally highly tied to stablecoins because they are typically the primary quote asset in perpetual markets. USDT has already established a significant position here: on Binance, the world's largest perpetuals exchange, most trading markets use USDT as the primary quote asset. Any user trading Binance's core markets primarily transacts through USDT. This further solidifies USDT's supply within the exchange, naturally creating downstream demand for deposits, withdrawals, and on-chain activities around it.

Although Hyperliquid's trading volume is much lower than Binance's, it is already the largest on-chain perpetuals exchange, commanding a 30% share of the entire on-chain perpetuals market and holding 46% of open interest. This position has remained stable despite repeated competitive challenges.

Meanwhile, while Hyperliquid is not a centralized exchange, it is clearly capable of competing with its centralized counterparts. As of April 30, its trading volume was approximately 50% of Bybit's, 30% of OKX's, and 79% of Coinbase International's. All this combined amounts to 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.

Though still early stage, Hyperliquid's dominance in the on-chain perpetuals market and its ability to match or even, at times, surpass centralized exchange volumes gives it a global reach approaching Binance's coverage 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 Battleground

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, constrained by its regulatory framework, is limited in the customer range it can serve and the number of markets it can list. Currently, Coinbase covers about 100 countries, slightly more than half of Binance's 180. Hyperliquid, benefiting from a more "lenient" operating environment, can reach a broader market, giving it an advantage over both Binance and Coinbase—one that Coinbase would struggle to replicate on its own.

Therefore, Coinbase and Circle chose to let Hyperliquid handle the global reach, with USDC serving as the underlying asset entering these markets. This deal allows them to share in the upside through USDC supply growth and the revenue generated from it, without having to engage in a jurisdictional battle they are unlikely to win. They only capture a portion of the economic benefits, but it's a scale Coinbase couldn't achieve alone.

Tether Is Replicating the Same Playbook

Tether is also executing 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 credit lines for designated market makers, and funded the trading incentive layer.

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

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

Overall, to capitalize on the growth momentum from the GENIUS Act, Coinbase and Circle need more distribution channels, and the Hyperliquid deal might be just such a gateway: allowing USDC to spread within the core on-chain trading scenarios, enter one of crypto's fastest-growing categories, and gain the possibility of competing on a scale comparable to USDT and Binance.

This could also be a bet on the further opening of the US domestic regulatory environment. CFTC Chairman Selig has explicitly stated his desire to allow perpetuals trading within the US, which the passage of the CLARITY Act could ensure. Reports this week indicate the SEC is preparing to introduce 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.

Considering the stance of the CFTC under Selig's leadership and the SEC's direction under Atkins, Coinbase appears to be positioning itself proactively: ensuring Hyperliquid has distribution capabilities in the US market with USDC already installed as the core asset.

Bankless previously reported on the window of opportunity opening for perpetuals trading.

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

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