Ethereum Co-founder Vitalik Buterin highlights that establishing a decentralized stablecoin with “nation-state resistance” requires solving three major issues: USD dependency, oracle security, and yield competition.
(Background: The US Department of Justice convicted Tornado Cash founder Roman Storm of “unauthorized remittance,” prompting collective support from the crypto community)
(Additional context: From sanctions to legal trials: The privacy and responsibility debate surrounding the mixer Tornado Cash)

Table of Contents

• The crisis of highly centralized prosperity
• Breaking free from USD dependence
• Governance and capture costs
• Competition in staking yields

On

The stablecoins on Ethereum are projected to surpass 8 trillion USD in on-chain trading volume by 2025. Amid the influx of traditional giants like BlackRock, Ethereum co-founder Vitalik posted on the 11th warning: if we cannot establish a decentralized stablecoin with “nation-state resistance,” the entire crypto ecosystem may once again be locked down by a single fiat currency and centralized issuers.

We need better decentralized stablecoins. IMO three problems:

1. Ideally figure out an index to track that’s better than USD price
2. Oracle design that’s decentralized and is not capturable with a large pool of money
3. Solve the problem that staking yield is competition…

— vitalik.eth (@VitalikButerin) January 11, 2026

The crisis of highly centralized prosperity

Currently, the stablecoin market is dominated by Tether and Circle. After the passage of the US regulatory framework GENIUS Act, institutional players are accelerating their entry, which also amplifies single-policy risks. Vitalik states that we need better decentralized stablecoins, and currently there are three issues:

2. Index selection: Ideally, find an index that is more suitable to track than the “USD price”
3. Oracle design: Must be decentralized and not easily manipulated or captured by large pools of capital
4. Competition issue: Address the rivalry between staking yields and stablecoins used as collateral

Breaking free from USD dependence

Vitalik says that in the short term, tracking USD is acceptable, but he believes that one of the visions with “sovereign intervention resistance” should be to even be independent of USD price fluctuations.

Looking over a 20-year span, what if the USD experiences hyperinflation, even moderate inflation? What should we do?

Governance and capture costs

If you cannot solve point 2 (oracle security), you must ensure that the “cost of capturing the protocol” exceeds the “market value of the protocol tokens.” This, in turn, means the protocol must extract high value, surpassing the discount rate, which is very bad for users.

That’s why I’ve always opposed the mainstream “financialized governance”: this model inherently lacks asymmetry in defense and attack, so high levels of extraction become the only way to maintain stability. Of course, this is also a major reason I refuse to completely abandon DAOs (Decentralized Autonomous Organizations).

Competition in staking yields

If you do not address point 3, users will face suboptimal yields of a few percent annually, which is not worthwhile. Potential solutions to point 3 (these are just enumerations of possible approaches, not endorsements) generally include:

• (i) Reduce staking yields: Lower to about 0.2%, making it essentially an activity for enthusiasts.
• (ii) Create new types of staking: Yields nearly as high as conventional staking but without the same risk of confiscation.
• (iii) Make “confiscatable staking” compatible with “collateral availability”: Does this mean that the risk of confiscation could somehow be transferred to stablecoins and CDPs (Collateralized Debt Positions)? If so, both would need to stake and trust the same delegate.

Vitalik’s suggestions point out the path for DeFi in the next decade: only by simultaneously solving USD dependence, oracle security, and yield competition can decentralized stablecoins evolve from short-term arbitrage tools into truly censorship-resistant, cross-cycle digital value reserves.