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Stablecoin Issuers' Financial Policies

Author

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  • Rossello, Romain
  • WANG, Zijun

    (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.

Suggested Citation

  • Rossello, Romain & WANG, Zijun, 2026. "Stablecoin Issuers' Financial Policies," HEC Research Papers Series 1666, HEC Paris.
    • Handle: RePEc:ebg:heccah:1666
    DOI: 10.2139/ssrn.7587998
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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