Cardano Proposes $100 Million Treasury Diversification to Boost DeFi

Cardano co-founder Charles Hoskinson has proposed a strategic initiative to convert $100 million worth of ADA tokens from the project’s treasury into a blend of Bitcoin and stablecoins. This move is aimed at enhancing the liquidity of Cardano's decentralized finance (DeFi) ecosystem and boosting its growth. Hoskinson suggested this idea during a recent YouTube live stream, where he proposed converting the $100 million in ADA into a mix of stablecoins such as USDM and USDA, as well as ADA-backed stablecoin synthetics like IUSD, and some into Bitcoin to prime Bitcoin DeFi.

Hoskinson believes that strategically diversifying the treasury holdings could help improve Cardano’s low stablecoin-to-DeFi ratio, which currently stands at under 10%, with roughly $32 million in stablecoins and $330 million in total value locked (TVL). This ratio is significantly lower compared to rivals like Ethereum and Solana, which boast 190% and 110%, respectively. The goal is to increase Cardano’s ratio of stablecoin issuance and TVL to around 33% to 40%. Hoskinson claimed that the stablecoin situation is “killing Cardano” and that the proposal would generate “non-inflationary revenue” and help build the Cardano DeFi economy.

Hoskinson indicated that Cardano’s $1.2 billion treasury, or 1.7 billion ADA, could safely allocate 5–10% into stablecoins and Bitcoin without any significant impact. He dismissed claims that a $100 million sale would negatively affect the price of ADA, asserting that the sale would be absorbed by Cardano’s trading volume. “Hundreds of millions of dollars of ADA change hands on a daily basis, and the markets are deep enough that it could absorb within 30 to 90 days using TWAPs, OTCs, and other mechanisms, a hundred million dollar sale without moving the ADA price in any significant fashion,” he stated.

The proposal includes plans for yield-generating instruments and potential governance structures, including an elected board to manage the decentralized Cardano sovereign wealth fund (SWF). According to Hoskinson, the SWF is similar to how nations invest sovereign wealth into assets for future benefits. The generated income could be used to buy back ADA, which could spur demand for the token and boost its market price.

Hoskinson's proposal has sparked internal debate within the Cardano community. Critics have raised concerns about the potential market impact of such a large transaction. However, Hoskinson dismissed these worries, asserting that ADA's depth and trading volume can absorb the move without causing significant market disruption. He emphasized that the swap would not pose any problems and that liquidity is not an issue.

The proposal comes at a time when Cardano's DeFi and stablecoin footprint is seen as lagging behind competitors. Currently, only about 10% of Cardano’s total value locked (TVL) is in stablecoins. Hoskinson aims to push this ratio to 30%–40%, believing that the proposed swap would unlock non-inflationary revenue and establish Cardano as a serious DeFi player.

However, not all members of the Cardano community are on board with Hoskinson's plan. Some community members have taken a more cautious approach, focusing on infrastructure development rather than flashy capital moves. The community's reaction to the proposal remains divided. While some see it as a bold step towards enhancing Cardano's DeFi capabilities, others are cautious about the potential risks and the internal divisions it may exacerbate. The next steps for Cardano will depend on how the community and governance vote on this proposal, shaping the future direction of the network.