- The proposal calls for 50 million Cardano coins from the treasury.
- Most of the coins are earmarked for DEXs and lending protocols.
- Cardano’s DeFi market is worth $353 million.
The stablecoin buzz has spread to Cardano as the blockchain’s stakeholders have begun to vote on a proposal to pump $41 million of liquidity into the chain’s stablecoin market.
It’s a move that would mark Cardano’s biggest attempt to leverage crypto’s hottest sector.
The proposal calls for the creation of a dedicated fund seeded with 50 million Cardano coins, currently worth $41 million, and fiat-backed stablecoins. The proposal also recommends that 90% of the funds should flow into decentralised exchanges and lending protocols to bolster liquidity across Cardano’s DeFi market.
“There is a strong need for better liquidity, especially stablecoin liquidity, in the Cardano ecosystem,” the proposal stated. “The Cardano community as a whole benefits from deep stablecoin liquidity, and thus it makes sense to bootstrap this liquidity with funds from the Cardano treasury.”
It’s a bold gambit that appears to be tied to the swelling tide of stablecoins. This year, investments into stablecoin startups have increased fivefold compared to 2024. Market forecasts from Coinbase even project stablecoins topping $1 trillion by 2028.
At $353 million, Cardano’s DeFi market is a minnow compared to giants like Solana and Ethereum. Cardano creator Charles Hoskinson has previously bemoaned the lack of significant growth in Cardano’s DeFi market and blamed stakeholders like the Cardano Foundation for being slow and ineffective in securing stablecoin integrations for the blockchain.
Apart from seeding stablecoin liquidity, the proposal also recommends that 15% of the revenue that accrues to DeFi protocols from the funds should be converted to Cardano coins and returned to the treasury.
Still, the proposed plan is not without its risks, especially for the price of Cardano.
That’s because the proposal involves liquidating $27 million worth of Cardano coins to mint the fiat-backed stablecoins. The remainder of the Cardano coins will be held as the blockchain’s native asset to pair with stablecoins on decentralised exchanges.
However, the proposal authors say the coins won’t be sold on the open market but via over-the-counter deals with investors to reduce any adverse price impact. The proposal also stated that $27 million is smaller than the average daily volume of Cardano transactions.
Since the coins won’t be sold all at once, the selling pressure won’t have a major impact on Cardano’s price, according to the proposal.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
