Cardano Plans 8.3% Treasury Shift to Boost DeFi Liquidity

Cardano is exploring a strategic shift in its treasury management, aiming to transform a portion of its $1.2 billion treasury into a diversified yield portfolio. The proposal, outlined by founder Charles Hoskinson, seeks to enhance the protocol’s DeFi liquidity and long-term stability by converting approximately $100 million worth of ADA into a mix of stablecoins, Bitcoin, and other synthetic assets. This initiative mirrors the operational model of global sovereign wealth funds, which invest national surpluses to generate returns. In Cardano’s case, any returns from this diversified portfolio would be used to buy back ADA, strengthening the treasury over time and reducing dependency on new inflows.

One of the primary goals of this proposal is to significantly improve Cardano’s DeFi liquidity. Currently, the ecosystem’s DeFi stablecoin ratio is under 10%, which is considerably lower than competitors like Ethereum and Solana. By increasing this ratio to at least 33%, Cardano aims to enhance its liquidity and raise the likelihood of native stablecoins being listed on major exchanges. This move would not only bring more visibility but also boost user confidence in the platform.

In addition to financial improvements, the proposal also focuses on governance upgrades. Hoskinson suggested electing a board to oversee the fund’s operation, with managers competing to deliver returns. Profits from this fund would be returned to the treasury, inviting greater decentralization and allowing finance experts within the community to participate in ecosystem stewardship. This approach could boost community trust and ensure that the fund is managed in a transparent and efficient manner.

Looking ahead, the proposal positions Cardano’s treasury to evolve into a sophisticated, multi-asset fund. The long-term vision includes incorporating native tokens from partner chains, such as the KNIGHT token from the Midnight network, as well as Bitcoin and other stable assets through network fees or new integrations. By building the necessary infrastructure now, Cardano aims to manage this complexity and secure its financial future, positioning itself as a leader in the DeFi space.