Cardano Eyes Sovereign Wealth Fund to Tackle Stablecoin Liquidity Gap
Cardano is considering a significant overhaul of its treasury strategy, with founder Charles Hoskinson to enhance the protocol’s DeFi liquidity and long-term stability. The proposal aims to restructure how Cardano manages its vast treasury by converting a portion of it into a diversified, yield-generating portfolio.
This would include stablecoins, Bitcoin, and other synthetic assets, marking a strategic shift in its financial posture. If realized, the initiative could transform Cardano’s treasury into a decentralized version of a sovereign wealth fund, boosting ecosystem growth and its overall appeal to users.
Currently, Cardano’s treasury, valued at approximately $1.2 billion, is funded by network inflation and transaction fees but does not hold any yield-generating assets. The plan is to convert roughly $100 million worth of ADA about 5-10% of the treasury into a blend of native stablecoins like USDM, USDA, IUSD, and BTC. This could also support Bitcoin DeFi products launching on the platform.
This diversification strategy mirrors the operational model of global sovereign wealth funds, such as those managed by Norway or Abu Dhabi, which invest national surpluses to generate returns.
In Cardano’s case, any returns would be used to buy back ADA and strengthen the treasury over time. Significantly, this move could reduce dependency on new inflows and allow for self-sustaining growth.
A primary objective of the proposal is to drastically improve Cardano’s DeFi liquidity. The ecosystem’s current DeFi stablecoin ratio is under 10%, well below Ethereum’s 190% and Solana’s 110%. Increasing this ratio to at least 33% would drastically improve Cardano’s DeFi liquidity. It would also raise the likelihood of native stablecoins getting listed on major exchanges, bringing more visibility and user confidence.
Besides financial, governance upgrades are in focus. Hoskinson proposed electing a board to oversee the fund’s operation. These managers would compete to deliver returns, with profits returned to the treasury. This approach invites greater decentralization and allows finance experts within the community to participate in ecosystem stewardship.
Looking ahead, the proposal positions Cardano’s treasury to become a sophisticated, multi-asset fund. It is expected to eventually include native tokens from partner chains, such as the KNIGHT token from the Midnight network.
Bitcoin and other stable assets could also enter the mix through network fees or new integrations. By building the necessary infrastructure now, Cardano aims to position itself to manage this complexity and secure its financial future.