Polkadot Launches USDT-Backed dotUSD Stablecoin Under Community Governance

Community-governed stablecoin goes live on Polkadot

Polkadot has launched dotUSD, a stablecoin controlled by DOT token holders through its OpenGov voting system. The token is initially backed one-for-one by USDT, the Tether stablecoin. Subscan listed approximately 2.77 million dotUSD in total supply on October 8.

According to Polkadot's launch announcement, "it has no issuing company." Borrowing against DOT collateral is planned for a later phase.

How the token works

OpenGov referendum 1944 authorized dotUSD and created a DOT/dotUSD trading pool on Polkadot Asset Hub. The proposal directed $2.5 million in treasury USDT to mint the new token and $2.5 million in DOT to seed the trading pool.

Issuance and redemption run through an onchain peg stability module. Users deposit USDT into the module's reserve account to mint dotUSD. To redeem, users return dotUSD, which is burned in exchange for USDT from the reserve, minus any redemption fee.

Tether reserves the right to freeze its tokens under certain legal circumstances or terms breaches, which means the initial backing remains dependent on Tether even though dotUSD itself has no corporate issuer.

Governance can adjust minting and redemption fees, set issuance limits, and change which reserve assets are approved. Authorized administrators can also halt minting or swaps entirely.

Competition on the network

Polkadot already hosts other stablecoins. Circle launched native USDC on Asset Hub in September 2023 as a fully reserved, dollar-backed token with fiat on- and off-ramps through Circle accounts. Hydration's HOLLAR, launched in September 2025, supports borrowing against crypto collateral including DOT, ETH, USDT, USDC, tBTC, and WBTC.

What comes next

The next phase for dotUSD would introduce DOT-collateralized vaults, price oracles, a stability pool, and liquidation mechanisms. The referendum describes a design based on Liquity v2, where borrowers choose their own interest rates. This would let users create dotUSD against locked DOT, expanding issuance beyond the current USDT-only model.

What is confirmed

• dotUSD launched on October 8 under OpenGov governance.
• It is initially backed by USDT on a one-to-one basis.
• About 2.77 million dotUSD were in circulation as of October 8.
• Referendum 1944 allocated $2.5 million in treasury USDT and $2.5 million in DOT to launch the token and its trading pool.
• DOT-collateralized borrowing is planned for a future phase.

What is still unclear

• The timeline for the DOT-collateralized vault phase has not been announced.
• It is unclear what fees will be set for minting and redemption once governance acts on them.

Why this matters for Polkadot's DeFi ecosystem

dotUSD adds a new stablecoin option to Polkadot, giving users a community-governed alternative to Circle's USDC and Hydration's HOLLAR. Unlike HOLLAR, the initial launch phase does not allow users to borrow against their DOT holdings. Instead, it relies on USDT deposits for issuance, which ties the stablecoin's backing to Tether's control policies.

Sources

• The Defiant