Charles Hoskinson proposes a $100M ADA-backed Cardano sovereign wealth fund to grow DeFi through BTC and stablecoin investments.
Charles Hoskinson, the founder of Cardano, has responded to community apprehensions regarding a new proposal to establish a decentralized Sovereign Wealth Fund (SWF).
The strategy entails the allocation of $100 million in ADA from the project’s treasury to facilitate DeFi development by investing in Bitcoin and stablecoins.
The proposal aims to diversify the ADA treasury portfolio and generate long-term revenue that can be reinvested in the Cardano ecosystem.
Charles Hoskinson provided a comprehensive overview of the plan in an 18-minute podcast on X (formerly Twitter), urging the community to discuss the proposal rationally.
Charles Hoskinson’s $100 Million Proposal To Enhance Cardano DeFi
Charles Hoskinson, the inventor of Cardano, proposes that the Cardano treasury convert $100 million of ADA into a combination of stablecoins and Bitcoin.
He believes this conversion can accrue liquidity within the ecosystem, particularly in the availability of synthetic assets such as iUSD and native stablecoins like USDM.
Charles Hoskinson stated, “We could convert one hundred million ADA into USDM, establish financial infrastructure, and commence the development of trading, market-making, and total value locked (TVL) in the Cardano ecosystem.”
He observed that Ethereum and Solana have significantly higher stablecoin-to-TVL ratios, which is a factor in their ability to attract DeFi users.
Additionally, he clarified that Cardano’s stablecoin liquidity is still low compared to its rivals.
The stablecoin issuance of Cardano is approximately $33 million, while the network’s DeFi TVL is roughly $330 million.
Conversely, Ethereum’s stablecoin ratio surpasses 190%, while Solana’s is approximately 110%.
ADA Market Liquidity, Selloff Concerns
Other community members have expressed apprehension that the cryptocurrency price would be negatively affected by the sale of 100 million ADA.
Charles Hoskinson addressed these concerns by referencing ADA’s daily trading volume and liquidity levels.
He assured me his proposed conversion would not result in substantial price fluctuations.
Additionally, he recently disclosed the reasons for Cardano’s decline.
Charles Hoskinson asserts that the cryptocurrency’s price is not visibly affected by the daily exchange of hundreds of millions of dollars of ADA.
He further stated that the transaction could be finalized using over-the-counter (OTC) channels, time-weighted average prices (TWAP), and other professional trading strategies.
Hoskinson clarified that professional traders frequently transfer substantial quantities of ADA without disrupting the market.
He asserted that a $100 million divestment could be completed within 30 to 90 days with a price movement of less than 0.5%.
He underscored that “ADA does not have a liquidity issue.”
Charles Hoskinson’s Treasury Growth Strategy
As per Charles Hoskinson, the Cardano SWF would aim to generate an annual return of 5-10%.
ADA may be repurchased and reinvested in the treasury using the proceeds produced by these investments.
This model is designed to establish a sustainable development cycle within the ecosystem.
As Hoskinson illustrated, the national wealth funds of states such as Norway and the UAE generate revenue through diversified investing.
He believes the same structure can assist Cardano in creating a more equitable treasury.
He also disclosed that significant Cardano teams and DeFi developers have already received a document delineating the fund’s structure.
They are currently in the process of evaluating the proposal and are anticipated to commence the process of syndicating it with other components of the ecosystem.
Timeline For Governance, Implementation
Charles Hoskinson, the founder of Cardano, proposed that the Cardano community could ultimately elect a governing board to supervise the SWF.
Individuals with expertise in financial and Web3 would comprise this commission.
This would guarantee transparency and auditability by utilizing decentralized governance tools and smart contracts.
The proposal may be further discussed at the Rare Evo conference later in the year, even though it has not been formally submitted for approval.
Given the increasing likelihood of ADA ETF approval, it would be incorporated into Cardano’s broader economic framework if an agreement is reached.
The founder of Cardano also discussed the necessity of infrastructure that facilitates a multi-asset depository, particularly in light of the company’s preparations for the integration of partner chains.
He emphasized that ADA is merely one component of the future treasury blend, which may also encompass assets such as Bitcoin and the Knight token from the Midnight sidechain.
