Exploring the Concept of a Solana-Centric Stablecoin
The digital finance world is constantly evolving, with industry leaders and experts weighing in on the latest trends and innovations. Recently, Mert Mumtaz, CEO of Helius Labs, reignited discussions within the Solana community. On September 10, Mumtaz proposed the idea of a stablecoin aligned with Solana, where the reserve yield would be redirected to benefit SOL through buybacks or burns. This could either be integrated as a protocol feature or managed by competing digital-asset treasury entities (DATs). “I’m warming up to the idea of Solana having its own stablecoin,” Mumtaz commented, suggesting that 50% of the yield could be used to burn SOL. Later, he revised his stance, indicating that rather than being embedded into the system, a DAT should handle it, potentially leading to significant growth.
The Case for a Solana-Aligned Stablecoin
Mumtaz’s argument centers on what he calls “yield leakage” from the Solana network. He points out that stablecoins act as commodities and that, currently, a significant portion of the yield is captured by Solana’s major competitor. According to Mumtaz, the US GENIUS Act enables stablecoins to be easily swapped, leading issuers to compete fiercely for dominance. He referenced the recent intense competition among stablecoin companies as evidence. Mumtaz suggested that if a Solana-centric stablecoin is not feasible, then DATs should be considered as they essentially function as mechanisms for purchasing the underlying token.
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This perspective aligns with the new US legislation. The GENIUS Act, enacted in July, designates “payment stablecoins” as neither securities nor commodities for federal purposes. It places them primarily under the jurisdiction of banking regulators, distinctly separating them from SEC and CFTC oversight. Although Mumtaz’s description of stablecoins as commodities is more rhetorical, the law’s significant financial implication is that stablecoins cannot distribute interest to holders. Instead, the issuers or related structures capture the reserve income, and they can decide how to use it. This is the opportunity Mumtaz believes should benefit Solana.
Initial Responses and Enthusiasm
Within hours of Mumtaz’s proposal, a response came from the CEO and co-founder of KAST. “We will allocate 101–103% of all interest income from USDK on Solana to repurchase SOL,” he announced. This initiative would be managed by a foundation issuing a token post a planned Token Generation Event (TGE), with USDK being a U.S. “Genius compliant” stablecoin. The additional 1–3% above 100% would be utilized as marketing expenses. KAST and m^0 have previously announced plans to introduce programmable, application-specific dollars on the network. KAST’s consumer app and card are already geared towards global stablecoin transactions.
The Mechanics of the Proposal
The proposed mechanism is straightforward: a native USD stablecoin generates reserve yield (such as from Treasury bills) at the issuer level. A DAT structure then pledges this income to purchase SOL on the open market, either to retire it or reinvest it into ecosystem initiatives.
Mumtaz even presented a simplified model: “Imagine a Solana DAT runs a Solana stablecoin, perhaps named USDmanlet, which generates yield. The DAT uses this yield to buy SOL, integrating it into the ecosystem and reinvesting the yield, or burning SOL.”
The Battle of Stablecoins on Solana
Mumtaz’s critique, targeting USDC’s economics and Coinbase’s Base Layer 2, underscores the strategic disadvantage for Solana. Coinbase and Circle share USDC reserve income, which has become a significant revenue source as stablecoin supply rebounds. Coinbase’s Base, an Ethereum Layer-2, has rapidly developed into a high-activity on-chain venue.
While USDC operates transparently, for Solana enthusiasts, allowing substantial Solana-settled stablecoin activity to generate issuer profits that are subsequently invested in a competitor’s ecosystem is not ideal. Mumtaz aims to address this “simple problem,” either by embedding a solution or, more realistically, by fostering market-driven competition among issuers and DATs.
Industry Reactions and Future Directions
Tushar Jain, co-founder and managing partner of Multicoin Capital, echoed Mumtaz’s sentiments on social media: “One of Solana’s strengths is its ability to adopt successful ideas from other ecosystems. Encouraging stablecoin issuers to purchase HYPE with USDH interest is a compelling strategy to drive revenue. Why should Circle retain all interest revenue from USDC on Solana?”
Currently, Mumtaz’s proposal remains just that—a proposal. There is no formal Solana Improvement Proposal (SIP) or governance vote to incorporate any changes at the protocol level. Mumtaz himself emphasizes the potential of a market-driven DAT approach. Whether the outcome involves competing issuers committing to buybacks, a designated “ecosystem stable,” or a versatile treasury program, the ultimate goal is clear: prevent yield leakage and direct it towards SOL.
As of the latest update, SOL was trading at $228.
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