Cardano Decentralized Sovereign Wealth Fund

Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. Always warm, always sunny, sometimes Colorado. Today is June 12th, 2025. I'm making a quick video to talk a little bit about liquidity portfolio management and some finance topics. As many of Cardano has a disproportionately low ratio of stablecoin issuance to our DeFi.

It sits a little under 10%. There’s about $33 million worth of stablecoins issued in the Cardano ecosystem and about $330 million worth of TVL. When you compare that with Ethereum, the ratio is actually 190%, and in Solana, about 110%. I forget the Solana number; I think it’s like $11 billion to $8 billion or something like that. A lot of people are discussing what we should do with the treasury.

Currently, the treasury is kind of push-only. It gets filled up with inflation and transaction fees, and there really aren’t any yield-bearing instruments inside the portfolio of the treasury that generate returns and then donate those returns back, you would with a normal sovereign wealth fund. When you look at things like Norway’s sovereign wealth fund or Abu Dhabi’s sovereign wealth fund, both of which have over a trillion dollars, they get annualized returns. Those returns get sent back, and there are policies about how much can be spent on an annual basis. The same goes for Alaska’s fund, which is about $180 billion.

One of the things we’re looking into right now is whether we can solve multiple problems at the same time. I’d like to see if we could take about $100 million worth of ADA in the treasury and convert it to a blend of a collection of stablecoins within Cardano, such as USDMU, USDA, as well as ADA-backed stable synthetics like IUSD. We could also convert some of it to Bitcoin to prime the Bitcoin DeFi. It’s complicated because you have to also look at the yield side of the market and the readiness of the DeFi applications for this. I wrote a document that’s about 40 pages long and I gave it to Dan Singleman, Fami, Ryan, and a few other people on our side.

We’re going to review it and then syndicate it with many of the DeFi applications in the Cardano ecosystem to discuss practicality, readiness, and where yield would come from, either from real-world assets or other sources. I do think we can easily pair that. Now, there are a lot of people on Twitter claiming that a sale of $100 million worth of ADA would be catastrophic to the price and would collapse it. I guess that comes from inexperience. People don’t seem to understand that while Cardano has many failings, liquidity, exchange listings, and trading are not among them.

Hundreds of millions of dollars of ADA change hands on a daily basis, and the markets are deep enough that it could absorb a $100 million sale within 30 to 90 days using T-WPS, OTCs, and other mechanisms without moving the ADA price in any significant fashion—probably less than 0.5%. Speculation alone would likely move it either up or down, and we see much more volatility on a regular basis from all these factors. I don’t think for a moment that a $100 million sale would cause any problems at all. We know this because we deal regularly with people who have exchange products, conduct OTC transactions, and monitor the markets daily.

ADA does not have a liquidity problem. No proposals have been pushed yet. We’re going to work on it, and I think this is something that, by the time of Rare Evo, we can begin to propagate. The hope is to get those ratios more in line with what you would expect in a DeFi ecosystem of at least 33% to 40% ratio between stablecoin issuance and TVL on the network. By doing so, it would substantially enhance the possibility of getting some of the stablecoins in Cardano listed on tier 2 and 3 exchanges, which would improve liquidity.

We, as an ecosystem, have to be willing to invest in ourselves. We can’t go to venture capitalists and say, “You should put a bunch of money in Cardano,” or to external people and say, “You should buy some ADA,” when we are unwilling to deploy the assets in our treasury. The first thing you do when you have assets for a public good is diversify them. Diversification ensures that the asset's buying power is preserved. I do believe that converting 5% to 10% of the treasury into stable assets and assets like Bitcoin will not materially impact Cardano.

In doing this, we can create a yield, and that yield on an annual basis can be used to purchase ADA and replenish the treasury over time. If this program is successful, we can continue that strategy on an annualized basis and potentially grow to a billion-dollar-plus stablecoin treasury and Bitcoin treasury to augment and enhance the ADA value in the treasury. This sets us up for great returns and a pretty stable floor for the ecosystem as a whole, you would want in any good sovereign wealth fund. There needs to be some discussion about how it would be governed and managed. I think there’s a lot of opportunity for actual decentralization here.

For example, it would be really cool to have an elected governing board to manage the sovereign wealth fund, creating competition among administrators. The profits generated, minus the administration fees, would be used to purchase ADA and donated back to the treasury on an annual basis. At any time, the stablecoins can be liquidated, ADA can be purchased, and that ADA can be donated to the treasury, effectively converting it back in. This is something that everyone should start discussing: what do we want to do beyond spending money for growth hacking and development? Do we want to have something that resembles a sovereign wealth fund as we are a digital nation?

What are the goals of that? I think solving the stablecoin liquidity issue and augmenting the DeFi ecosystem through a blend of various stablecoin instruments and synthetic assets is a really good step forward. Capital can be syndicated, and once this starts moving in anticipation of the bull market, we could see a multiplication of 5 to 10 times of outside capital flooding in because it signals that Cardano is investing in its own ecosystem. There’s a long road between an idea and the execution of that idea. This would require a coalition of Cardano DeFi applications, like fluid tokens, indigos, and the DEXs, to cooperate and work with the idea.

We’d also have to figure out how the audit and oversight would work, as well as governance and transparency. None of these things are unworkable. We already have a pretty good treasury contract for the withdrawal of funds that was written by Sunday Labs and audited by TXpipe for the budget withdrawals being proposed. It would be straightforward to have most of this function as a BOR organization or a cybernetic organization. A combination of a DAO with smart contracts would be a prudent structure, along with an offshore management vehicle connected to regulated actors that do asset management for a living in the Web 3 space.

The returns can range from a few percentage points to double digits, depending on the risk tolerance of the profile. This would allow us to correct the liquidity problem and discuss the long-term growth of stable assets at the discretion of the treasury. I can imagine a world where Cardano’s treasury holds billions of dollars of both ADA and other assets. It’s important to understand that Cardano’s treasury will inevitably be multi-asset due to partner chains. When Midnight launches, Midnight will pay block rewards to the SPOs and ADA delegators, meaning that those who participate will receive both ADA and the Knight token.

Once we enable the treasury to accept Cardano native assets, we can also start creating a reality where partner chain fees go to the treasury, which means the treasury will hold not just ADA but also Knight. How are we going to manage these types of things, especially if we have five, ten, twenty, or thirty partner chains and a large portfolio? Transaction fees in Bitcoin for Bitcoin DeFi could also go to the treasury. If that’s the case, the treasury will start accumulating more Bitcoin as we expand Bitcoin DeFi. Bitcoin, as an asset, will function the same way as stablecoin settlements.

For instance, if Tether or Circle want to use Cardano as the vehicle to issue stablecoins onto Bitcoin, they can pay their transaction fees into Bitcoin in the stable asset because of Babel fees. We need to begin building infrastructure as an ecosystem for a treasury that is multi-asset. We have to think about how to administer and govern that. This also allows highly specialized people with a deep finance background and a good understanding of Web 3 to run for oversight roles, in addition to dedicated administrators managing those funds on behalf of the ecosystem. There’s a lot to think about and discuss, and the hope is that we can have something fleshed out by Rare Evo that can be discussed in detail with the community.

After we get past the current 39 budget withdrawal requests, we can discuss this as a supplemental proposal, perhaps before the end of the year. As we conduct the post-mortem on the budget process, we can make provisions in the constitution for more granular treasury management on the portfolio allocation side. Don’t let anyone on Twitter tell you we can’t handle a $100 million sale. Plenty of people have done it in the ecosystem, especially Japanese whales. In many cases, they’ve done it poorly, but using T-WPs and OTC and just common sense, the market can easily absorb without any disruption seven to eight-figure divestments on a daily basis.

ADA is a well-traded asset, and we regularly see half a billion to a billion dollars in turnover daily. That’s just the surface stuff, not the OTC trading that isn’t recorded but is starting to occur because institutions are acquiring ADA in chunks for exchange-listed products. There won’t be any issue at all with a $100 million divestment; it just has to be done by professionals. You don’t just dump it on an exchange. There are plenty of people in finance who do this for a living, and you’re probably looking at about 50 basis points worth of slippage.

Just food for thought—something to consider. You have to understand that Cardano has a lot of people involved. It looks we have 4.3 million users from the last count, and many of those users are financial professionals from Wall Street. Some are from the hedge fund industry and have dealt with assets under management larger than the market cap of Cardano.

They’re floating around in various institutions, some work for me, others for different people, and some are just free agents who enjoy being in the ecosystem. They’re always a phone call away to GSRs, Jane Streets, Wave Financials, and Brevan Howards of the world. Everything in Wall Street is transactional. You state your goal, and they figure it out; it’s just a negotiation on how much you’re going to pay for it. Even Goldman Sachs has a price.

We are a sovereign entity. Cardano has a 1.7 billion ADA wealth fund, about $1.2 billion. That’s nothing to laugh at.

We have to start treating ourselves that way and act in a considered and deliberate manner, systematically solving problems. One of the biggest problems before us is a lack of stablecoin liquidity minting and a misaligned ratio of our TVL to our stablecoin compared to our neighbors like Solana and Ethereum. That’s definitely a solvable problem with the Cardano treasury and syndicating it with good yield products. Bitcoin DeFi will also massively help this because many people will come and lend their Bitcoin to participate in yield products on Cardano. We need to prime the pump, and I’d say we need about $25 to $50 million of Bitcoin to get started.

We could easily do that as an ecosystem or through other actors. We’ve been discussing options with a lot of large-scale Bitcoin holders, especially if they can be paired with high-quality yield instruments. These discussions are part of the overall Bitcoin DeFi agenda. It’s the same with XRP entering our space. I’d love for Cardano Midnight to be the DeFi layer of the XRP ecosystem.

They can stay as XRP but get much better yields for their holders and for Ripple itself, the company that created XRP. We’re in a good position, and the ecosystem is strong. We should never forget the principles we were founded on: to move in a considered and deliberate way and be systematic about it. Just because people are talking about something doesn’t mean it’s going to happen tomorrow. We were discussing the budget in November of last year, and it still hasn’t been closed here in June.

Everything is built for conversation and a systematic approach, allowing everyone to share their opinions. Some people are very knowledgeable, while others just say things without experience. Some are quite good at one thing but perhaps not so good at another. We will get this done as an ecosystem, and we’ll continue to improve and strengthen things. The budget process alone will have a large post-mortem, and hopefully, it will result in changes to the constitution, improvements to the executive function of the government, including delegated authority, and a mechanism upon which we can all agree to a universal set of KPIs and strategy for Cardano.

This will make the budget process immeasurably easier to conduct for 2026. Remember, we’ve strengthened our institutions through this entire process. We’ve written smart contracts throughout and trained all the DREPs on what works well and what doesn’t. I would argue that we need to enhance the voting systems as well. The time has come for some form of anonymous ballot for certain voting rounds so that especially smaller participants can vote without fear of retaliation.

The time has also come for quadratic voting and preference orders, especially for large-scale budgets where you need to filter out hundreds of proposals to a few dozen that compete against each other. It’s clear that the community wants multiple administrators and institutions, as evidenced by Amaru’s approval and varying degrees of oversight quality. Some proposals suggest people become their own oversight, which will be unique and interesting. We’ll work our way through it and have those discussions. I believe we’ll get there, and a very healthy component of those discussions is the concept of a sovereign wealth fund.

By having that, Cardano can start making blockchain-to-blockchain partnerships, allowing us to take positions in other assets while they can take positions in ADA, forming trade alliances between Cardano as a digital nation and other cryptocurrencies. That’s all I have to say about this. Food for thought for everyone. I hope you all take some time to think about it. It’s a thriving, healthy ecosystem.

We’ve seen a tremendous amount of growth in the ecosystem as a whole, especially in Cardano. Interest is way up, and search volume about Cardano on Google is increasing. Many people are interested in building projects, and we’re starting to systematically solve our problems, the Cardano DeFi kernel concept, Bitcoin, Dwise, and the upcoming launch of Midnight. Things are getting good, and Midgard is improving, StarStream is progressing, and there’s a lot of great work on the client diversity side. I’m very happy about how the ecosystem is shaping up.

There are still some rough edges, some are legacy concerns that will eventually get resolved, and others are just things we’ve never done together as an ecosystem. Things that are easy or trivial for me, like picking up the phone to talk to a Wall Street person, the community has to learn how to do that and build the necessary trust and relationships. We will do that, and it will get done. It’ll just take some time, but we’re doing it all together and out in the open. No matter what comes our way, we’re a very resilient ecosystem.

Thank you all so much for listening, and I will see you soon. Cheers.