Cardano Founder Proposes $100 Million Plan to Boost DeFi Liquidity

Cardano’s founder, Charles Hoskinson, has proposed a strategic initiative to bolster the platform’s decentralized finance (DeFi) landscape. The plan involves reallocating $100 million worth of ADA from the treasury, converting it into Bitcoin and stablecoins such as USDM and USDA. This move aims to increase the stablecoin presence on-chain, addressing community concerns about market disruption and liquidity issues.

Currently, stablecoins account for approximately 10% of Cardano’s Total Value Locked (TVL), a figure that is significantly lower compared to competing ecosystems like Solana. This proposal signals a potential shift in Cardano’s approach to DeFi growth, despite previous statements from the Cardano Foundation that downplayed the importance of TVL as a metric. The initiative underscores a nuanced strategy to strengthen Cardano’s financial infrastructure by diversifying asset holdings and fostering greater stability within its ecosystem.

Hoskinson’s plan involves converting $100 million worth of ADA into USDM, a stablecoin backed 1:1 with U.S. dollars and fully on-chain. This conversion is expected to enhance trading, market-making, and total value locked (TVL) in the Cardano ecosystem. The Cardano treasury currently holds approximately 1.7 billion ADA, valued at over $650 million. Hoskinson argues that this stockpile of funds is currently idle, missing out on significant opportunities for growth. By anchoring $100 million worth of ADA into USDM, Hoskinson envisions a similar liquidity boost as seen in ecosystems like Ethereum or Solana.

The proposal also includes the idea of creating a sovereign wealth fund to invest in Bitcoin, which would further support ADA buybacks and ensure long-term growth. Hoskinson’s strategy reflects a self-reinforcing loop where the company earns passive income by providing liquidity, uses that income to buy back ADA, and refills the treasury. This approach is designed to strengthen stablecoin liquidity and encourage DeFi activity on the Cardano network.

Hoskinson has expressed frustration over what he sees as community inaction, particularly in utilizing tools like Intersect, a governance entity designed to manage treasury funds and proposals. He believes that Intersect was set up to give the Cardano treasury the freedom to implement such initiatives. Additionally, Hoskinson noted missed opportunities, such as failing to bring Circle’s USDC stablecoin to Cardano, which he believes could have positioned Cardano ahead in the stablecoin space.

Hoskinson also sees potential in including venture capital from firms. He argues that investors might fund liquidity initiatives, returning profits to the treasury and creating a growth cycle. Hoskinson’s vision for Cardano includes launching a private stablecoin, which he believes could offer privacy without sacrificing regulatory compliance. He envisions a stablecoin with selective disclosure to meet anti-money laundering and anti-terrorism funding provisions required by regulators.

Hoskinson’s proposal has been met with reassurances that the $100 million treasury plan will not negatively impact the price of ADA. He presented the idea during a recent ask-me-anything session, suggesting that the move would boost stablecoin liquidity in Cardano’s DeFi ecosystem and jumpstart broader growth. The proposal reflects Hoskinson’s proactive strategy to create a self-sustaining funding loop using a portion of the ecosystem’s treasury funds, aiming to enhance the overall liquidity and DeFi capabilities of the Cardano network.