Cardano founder Charles Hoskinson has sparked fresh debate across the crypto community by proposing a plan to convert a portion of Cardano’s treasury holdings, 140 million ADA, or roughly $100 million—into USDM, a native Cardano stablecoin. The aim, he explained, is to boost liquidity in the Cardano DeFi ecosystem and encourage broader adoption of decentralized finance tools on the platform.
Speaking during a recent Ask Me Anything (AMA) session, Hoskinson addressed the current stablecoin shortage and its limiting effect on Cardano’s DeFi development. With the treasury holding around 1.7 billion ADA (valued at $1.23 billion), the founder believes that redirecting a modest percentage into USDM could unlock massive growth potential for the ecosystem.
Moreover, Hoskinson argued that the treasury could earn a 5% to 10% annual return through yield-bearing stablecoin opportunities, without negatively impacting ADA’s price.
Community Voices Concern Over Sell Pressure
Despite the proposal’s stated benefits, not everyone in the Cardano community welcomed the plan. A Decentralized Representative (DRep) known as Whale raised alarms on X (formerly Twitter), claiming that injecting 140 million ADA into the market might create excessive sell-side pressure.
Whale acknowledged that stablecoin growth is critical for DeFi progress but warned that the timing of such a move could destabilize ADA’s price. He pointed out the risk of front-running, where market participants sell in advance of an anticipated large transaction, potentially devaluing ADA before the actual conversion occurs.
As an alternative, Whale suggested minting crypto-backed stablecoins, such as ObyUSD, to avoid direct ADA sales while still injecting stable liquidity into Cardano’s ecosystem.
Related article: EMURGO Addresses Genesis ADA Controversy, Reaffirms Commitment to Cardano Decentralization
Hoskinson Insists OTC and TWAP Tools Can Prevent Volatility
In response, Hoskinson dismissed fears of a market disruption. He explained that using over-the-counter (OTC) trades and time-weighted average price (TWAP) strategies could minimize any potential impact on ADA’s price. These methods, he claimed, are specifically designed to handle large trades without moving the market significantly.
Hoskinson also highlighted that ADA sees billions in weekly trading volume, suggesting that a $100 million conversion—if executed carefully—would be absorbed with ease. Furthermore, he cited Cardano’s current stablecoin market cap to total value locked (TVL) ratio, which sits at just 9.65%, well below Ethereum’s 195.3% and Solana’s 127.4%. This disparity, he argued, reflects a major liquidity gap that Cardano urgently needs to address.
Additional Criticism Challenges Market Depth Assumptions
Another critic, PlayfulOtter, also weighed in, questioning Hoskinson’s claim that the market could absorb such a conversion without a dip in price. He pointed to typical behavior in the broader crypto market, where sell volumes between $3 billion and $5 billion can often cause a 15% to 20% decline in a token’s market cap.
Although Hoskinson reiterated his confidence in Cardano’s deep liquidity, PlayfulOtter countered that finding a $100 million buyer in any market is a challenge, especially one that won’t demand discounted prices or slippage protection.
Still, Hoskinson remained firm in his belief that strong Cardano DeFi adoption and well-structured trading strategies could mitigate risks and secure long-term growth without sacrificing token value.
Final Thoughts: Can Cardano Balance Growth and Stability?
This debate reveals deeper questions about Cardano’s DeFi strategy, treasury management, and path toward broader adoption. While Hoskinson’s proposal aims to address a real shortcoming in the ecosystem—stablecoin liquidity, it must also navigate the trade-offs between financial innovation and market integrity.
As the Cardano community continues to weigh the pros and cons, the spotlight now falls on how well the platform can balance aggressive growth initiatives with responsible governance, without alienating its user base or risking token stability.
