Stablecoin Issuers' Financial Policies

Romain Rossello and Zijun Wang
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Zijun Wang: HEC Paris

No 1666, HEC Research Papers Series from HEC Paris

Abstract: This paper studies the financial policy of stablecoin issuers: how they are funded and how they distribute reserves. We document that issuers with similar business activities may adopt similar policies (MakerDAO and Aave) or very different ones (Tether and Circle). We rationalize this pattern with a model in which the return earned on reserves is a fundamental characteristic that differs between on-chain and off-chain issuers. The higher return available to off-chain issuers exacerbates agency frictions and, in turn, shapes optimal financial policy. We show that the resulting effect is non-monotone in observable outcomes: a higher return can lead to concentrated insider ownership and flexible, aggressive payouts, but it can also lead to dispersed equity ownership and rigid, conservative policies. We close with novel evidence that the implementation of on-chain buyback programs can create stability risks and temporary mispricing.

Keywords: Stablecoins; Decentralized Finance; Payout Policy; Buybacks; Agency Conflicts (search for similar items in EconPapers)
JEL-codes: E42 G23 G32 G35 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2026-10-09
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1666

DOI: 10.2139/ssrn.7587998

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