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DOT Polkadot launches dotUSD: Claiming "no issuer", but actually anchors a centralized stablecoin
On Thursday, October 8, Polkadot officially launched dotUSD, which it claims to have "no issuer." However, this online token was actually minted with Tether's USDT in a 1:1 ratio. This is exactly the kind of dollar stablecoin controlled by centralized management that Polkadot's own propaganda warns of.
In the same announcement issued by Platform X, Polkadot pointed out that the vast majority of stablecoins in the world are issued and controlled by a few companies. The market has exceeded $250 billion, and these companies, like banks, decide who is eligible to hold their tokens. Polkadot claims that dotUSD is based on a different premise, namely that there is no issuing company. However, at this stage, this premise is not reflected in the products already launched.
Exported USDT
According to the governance proposal behind the release (Referendum 1944), this rollover is carried out in stages. The first phase has been built and complies with the on-chain regulations in the proposal: users can use USDT to cast dotUSD at a USD1-to-USD1 ratio until the supply cap is reached. At this stage, the reserve is backed by Tether's tokens.
To start the transaction, it is proposed to withdraw funds from Polkadot's vault and establish a liquidity pool for DOT and dotUSD on Polkadot's Asset Hub. It was originally planned to set aside US$2.5 million for casting dotUSD and US$2.5 million for DOT to provide liquidity in the pool, with a total start-up capital of US$5 million. However, a later draft reduced the amount of each component to $1.5 million and adjusted the total start-up capital to $3 million.
The Polkadot Community Foundation, which proposed the proposal, stated that it acts only in an administrative capacity and will not issue, operate or host dotUSD, DOT or USDT.
How did the first phase weaken Polkadot's propaganda?
The newly launched product is not the exact product discussed in the proposal document. This is because the proposal had opposed building based on the same asset that now serves as its backup asset.
The proposal states that centralized stablecoins such as USDC and USDT have "emergency braking switches." They are accountable to the government and have the right to freeze user accounts. They can also blacklist addresses and affected holders cannot appeal. However, this dependence warned of in the proposal is now reflected in dotUSD. The US$1 dotUSD minted in the first stage is actually a claim on US$1 USDT placed in reserves.
This means that if Tether freezes the wallet holding the reserve, the reserve assets supporting the dotUSD will also be frozen.
Tether's freezing operation is not groundless
The concerns in the proposal about centralized stablecoin issuers are not a false alarm. Tether does routinely perform freezing operations. According to reports, during a single 30-day window, Tether froze more than $514 million in USDT in 370 addresses on the Ethereum and Wave Field networks, in addition to $1.26 billion being blacklisted in 2025.
Once a freeze is implemented, it is rarely lifted. However, those powers are currently being tested in courts. On October 6, payment company Conduit sued Tether in federal court in New York, involving a $2.76 million USDT freeze. Conduit said its main operating account had been locked for more than a year without any explanation, and Brazilian police confirmed they had never marked the wallet.
This is the second such lawsuit heard by the same court in as few weeks. Earlier, two Thai businessmen filed a lawsuit over $42.4 million being frozen at ten Ethereum addresses, claiming Tether blacklisted any subpoenas based on an informal request from the Department of Homeland Security several months before it received it. Tether called the lawsuit groundless and highlighted its work in cooperation with more than 340 law enforcement agencies.
The decentralized version is still a promise
So far, the agreement has not delivered on what it advertises in the proposal, so everyone's eyes have turned to the second phase. It is expected that at this stage, the system will have a DOT mortgage vault, oracle, stability pool, clearing mechanism and redemption mechanism. However, there is no clear date for the release of the second phase. Since co-founder Gavin Wood mentioned the work at the Web3 Summit in July 2025, plans surrounding a DOT-backed Polkadot stablecoin have been circulating for more than a year.
