Polkadot’s governance system is in the process of deciding whether the network should mint its own US dollar-pegged stablecoin, and the vote isn’t exactly close. Referendum #1944, which proposes creating a decentralized stablecoin called dotUSD, has attracted 97.5% support from voters so far, with roughly 2.31 million DOT cast in favor against just 59,900 opposing votes.
The proposal calls for $5 million in initial liquidity, split evenly between $2.5 million in USDT for minting the stablecoin and $2.5 million in DOT allocated to a liquidity pool. If approved, dotUSD would become the default stable-value instrument across Polkadot’s ecosystem, a move designed to cut the network’s dependence on third-party stablecoins like USDT and USDC.
How dotUSD would actually work
dotUSD would be an over-collateralized stablecoin primarily backed by DOT, Polkadot’s native token. The liquidity pool would pair USDT with DOT on Asset Hub, giving dotUSD holders a pathway to swap in and out of the stablecoin. Over-collateralization means more DOT is locked up than the dollar value of dotUSD minted, providing a buffer against price drops in the underlying asset.
This is a protocol-level decision, not a private company launching a product. The proposal is moving through Polkadot’s OpenGov system on the Root track, which handles the network’s most consequential governance decisions. Contributions backing the initiative come from builders within the Polkadot ecosystem itself.
Polkadot’s second stablecoin attempt
This isn’t actually Polkadot’s first crack at a native stablecoin. A previous proposal for a DOT-backed stablecoin called pUSD secured over 75% support earlier in 2025, with more than $5.6 million in DOT committed to the effort.
The referendum is currently in its deciding phase, meaning the vote has passed the initial support threshold and is now running through the full decision period required by OpenGov’s rules.
Why this matters for Polkadot’s DeFi ambitions
Polkadot’s DeFi sector has historically been smaller than its peers, partly because the network’s architecture, built around specialized parachains, fragments liquidity across multiple chains. A protocol-owned stablecoin could serve as connective tissue, giving traders and developers a single stable asset that works natively across the ecosystem without relying on Circle or Tether to maintain bridge infrastructure.
External stablecoins carry counterparty risk. If Tether or Circle ever restricted access to their tokens on Polkadot, the ecosystem would have no fallback. dotUSD, backed by DOT sitting in Polkadot’s own smart contracts, removes that single point of failure.
An over-collateralized stablecoin backed primarily by DOT means the stablecoin’s health is tethered to DOT’s price performance. A severe and prolonged decline in DOT could strain the collateral ratio, potentially requiring liquidations or additional capital injections to maintain the peg.
The $5 million initial liquidity figure is modest by industry standards. For comparison, DAI’s total supply sits in the billions, and even smaller ecosystem stablecoins typically launch with larger war chests.
If dotUSD gains traction, it creates persistent demand for DOT as collateral. Every dollar of dotUSD minted requires more than a dollar’s worth of DOT locked up, effectively removing supply from circulation.