A Polkadot-native stablecoin Pegged to USD

Ecosystem
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A Polkadot-native USD-pegged stablecoin backed by U.S. Treasuries

As Polkadot continues to mature its governance and treasury management capabilities, I’d like to share an idea that could bring long-term sustainability and financial independence to the Polkadot DAO.

What if the Polkadot DAO itself issued a native USD-pegged stablecoin, fully backed by U.S. Treasury bonds, with the interest revenue generated by those bonds flowing directly into the Polkadot Treasury?

Learning from Other DAOs

This concept isn’t entirely unprecedented — similar ideas are currently being discussed in Arbitrum DAO regarding treasury-backed stablecoins and Treasury bond investments. However, what I’m proposing for Polkadot would be pioneering: creating a native stablecoin that’s backed by yield-bearing assets, with the revenue flowing directly back to fund ecosystem development and community initiatives.

Why This Matters Now

I know HOLLAR is about to launch, which is fantastic for the ecosystem — but it’s important to note that HOLLAR is a Hydration product, and the revenue it generates will benefit Hydration, not the Polkadot DAO itself.

This proposal would be something fundamentally different:

  • 100% ecosystem-native — built for and by the Polkadot community
  • USD-pegged stability — maintains 1:1 peg with the U.S. Dollar
  • Fully governed by OpenGov — transparent, democratic decision-making
  • All reserves and operations on-chain — auditable by anyone, anytime
  • Revenue-generating — yield from U.S. Treasuries would fund community initiatives, development, and ecosystem growth
  • Value capture — helps Polkadot capture value directly through financial infrastructure

The Strategic Vision

This approach would reduce our reliance on centralized stablecoins like USDT and USDC while creating a sustainable funding mechanism for the ecosystem. Instead of depending solely on treasury reserves or token inflation, we’d have a self-sustaining revenue stream that grows with adoption.

The beauty of U.S. Treasuries as backing is their combination of stability, liquidity, and regulatory clarity. They’re considered the gold standard for risk-free assets, making them ideal for backing a USD-pegged stablecoin that needs to maintain its peg reliably while generating consistent yield.

Technical and Legal Considerations

I’m not an expert in legal or technical implementation, but I wanted to open this discussion to explore the key questions:

Technical feasibility:

  • How would this integrate with existing Polkadot infrastructure?
  • What parachain logic would be required?
  • Which oracles would we need for Treasury bond pricing and management?

Legal framework:

  • What legal entities would need to be established?
  • How do we ensure compliance across different jurisdictions?
  • What regulatory hurdles might we face?

Governance structure:

  • How would OpenGov oversee reserve management?
  • What parameters would token holders control?
  • How do we balance decentralization with operational efficiency?

Looking for Collaboration

This could be a major step forward for Polkadot’s financial sovereignty and long-term sustainability. I’m looking for feedback and potential collaborators:

  • Developers — Is this technically feasible within our current framework?
  • Legal experts — What regulatory considerations should we prioritize?
  • Economists — How would this affect DOT tokenomics and ecosystem incentives?
  • Teams — Are there any projects interested in building this together?

The Path Forward

If this resonates with the community, we could start with:

  1. A detailed technical feasibility study
  2. Legal and regulatory research
  3. Economic modeling and impact analysis
  4. Community governance discussions through OpenGov

This isn’t just about creating another stablecoin it’s about building financial infrastructure that serves the Polkadot ecosystem’s long-term interests while reducing our dependence on external financial systems.

What are your thoughts? Let’s discuss whether this could be a transformative step for our network’s future.

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The man with the yellow hair in the oval office is making energetic and strong efforts to refute that claim. When you buy a US Bond, basically you are lending money to the US Government. A government that is going to expand its spending, and for the last months has been erratic, random and untrustable commercial and diplomatic partner. Exactly the opposite that a bond buyer will like. Liberation day and tariffs? It was the bond market crisis what forced the strategy correction.

Some news excerpts:

Moody downgraded US government credit rating, and its outlook is negative, instead of stable.

The BBB has passed US Senate and it is in his way back to congress to be voted

Also, food for though for the community, as open question to spark the debate: We know that US dollar is still king ( 50% of the world trade is still paid in green notes), but for a decentralized project like Polkadot, has it sense to be backed by a national currency ( controlled by in this case the Federal Reserve ). Have we become pragmatical or we are just cutting corners?

2 Likes
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You raise excellent points that get to the heart of both the practical risks and philosophical tensions in this proposal. Let me address both aspects:

On U.S. Treasury Risks

You’re absolutely right about the current political and economic uncertainties. The recent policy volatility, potential credit rating concerns, and market reactions are real risks that can’t be ignored. However, I’d argue that even with these challenges, U.S. Treasuries remain the closest thing we have to a “risk-free” benchmark in traditional finance.

More importantly, every major stablecoin today already faces this exact exposure - USDC, USDT, and others are all tied to USD and often backed by similar assets. The difference is that their yields flow to private companies, not back to a decentralized ecosystem. We’re not creating new risk here; we’re potentially capturing value that’s already being extracted by centralized players.

That said, your concerns about concentration risk are valid. Perhaps the initial proposal should consider a diversified basket of assets rather than just U.S. Treasuries - maybe including bonds from other stable jurisdictions, or even tokenized real-world assets that generate yield.

On the Decentralization Question

This is the more fundamental challenge you’ve raised, and honestly, it’s one I’ve been wrestling with. Are we being pragmatic or just cutting corners?

I lean toward pragmatism for a few reasons:

Meeting users where they are: USD remains the dominant unit of account globally. Even in DeFi, most users think in dollar terms. Fighting this reality might be ideologically pure but practically limiting.

Stepping stone, not destination: This could be a bridge toward greater financial sovereignty. Start by capturing value that’s currently flowing to centralized players, then gradually diversify into more decentralized alternatives as they mature.

Competitive necessity: If we don’t build this infrastructure, centralized players will continue to extract value from our ecosystem. USDC and USDT aren’t going away - they’re just not serving our community’s interests.

But you’re right to push back on this. Maybe the real question is: can we design this system to gradually reduce dependence on any single nation’s currency over time? Could we start with USD-pegging but build in mechanisms to eventually support a basket of currencies or even algorithmic stability?

A Potential Middle Path

What if we considered a hybrid approach:

  • Start with a diversified basket of stable, yield-bearing assets (not just U.S. Treasuries)
  • Include assets from multiple jurisdictions to reduce concentration risk
  • Build in governance mechanisms to gradually shift toward more decentralized alternatives
  • Design the system to be adaptable as better options emerge

The goal isn’t to solve all of DeFi’s centralization problems overnight, but to give Polkadot a seat at the table while we work toward better solutions.

What’s your take on this middle path? Are there specific decentralized alternatives you think we should be exploring instead?

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Becoming a regulated entity able to issue USD stable coins is not straight forward, luckily for us there are companies that already did their homework and their entire business model is to share the yield of the underlying bonds. Brale is such a stable coin issuer and they already launched a stable coin in Kusama, they share up to 90% of the generated yield which is pretty decent and it’s payed to a DAO that can further incentivize its holders. This is the way! :wink:

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This is exactly the kind of insight I was hoping for! Thank you for bringing up Brale I wasn’t familiar with their Kusama launch, probably need a more efficient way to find projects within the ecosystem, but this sounds like it’s already proving the concept I was proposing. How has their Kusama implementation been performing in terms of adoption?

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Why don’t USDC and USDT serve the interests of our community?

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Can you elaborate on the question? not sure what you mean

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The initial proposal you posted was lacking in ambition imho. I find your middle path to be a lot more exciting. Personally, I am looking forward to having a token representing a basket of currency such as SDR, as was initially envisioned on MakerDAO. I am also curious to have other experiments deployed on Polkadot, similar to the work done by reflexer.finance. Gold is also something I wish would be easily accessible on Polkadot, through Paxos or otherwise.