TLDR
- Charles Hoskinson has identified a severe stablecoin liquidity shortage as a major issue facing Cardano’s DeFi ecosystem.
- Cardano’s stablecoin to DeFi TVL ratio stands at just 9.65 percent, far behind Ethereum and Solana.
- Hoskinson has proposed converting 140 million ADA from the treasury into USDM to boost stablecoin availability.
- Critics warn that selling such a large amount of ADA could trigger short-term market pressure and worsen price declines.
- An alternative suggestion involves using ADA to mint crypto-backed stablecoins without increasing market supply.
Cardano founder Charles Hoskinson has identified stablecoin liquidity as a major barrier to DeFi growth on the network. Despite rising Total Value Locked (TVL) and active users, stablecoin adoption remains weak compared to competitors. As a response, Hoskinson has proposed a significant conversion of ADA to boost stablecoin presence.
Cardano Faces Liquidity Gap in Stablecoin Market
Hoskinson revealed that Cardano’s stablecoin market cap to TVL ratio is only 9.65%, far below Ethereum and Solana. Ethereum maintains a ratio of 195%, while Solana holds at 125%, signaling higher stablecoin integration. This disparity reflects a lack of capital-efficient liquidity in Cardano’s DeFi platforms.
He attributes low DeFi activity to the underutilization of fiat-backed stablecoins within the network. To resolve this, Hoskinson proposed a new plan involving a sizable ADA conversion to stablecoins. The initiative seeks to close the liquidity gap and stimulate smart contract usage.
According to his plan, 140 million ADA from the Cardano Treasury would be converted into USDM, Cardano’s native fiat-backed stablecoin. This move would support liquidity across decentralized exchanges and enhance protocol-level integration. Hoskinson emphasized the importance of stable assets for DeFi functionality.
The markets are deep. We could convert 140 million ada over a week or so without moving the market using OTCs and TWAPs. It’s a false narrative.
What is killing Cardano is our stablecoin situation. This would start to solve it. Generate some non-inflationary revenue for the… pic.twitter.com/vSXetbK9sv
— Charles Hoskinson (@IOHK_Charles) June 12, 2025
ADA Conversion Plan Draws Criticism Over Timing
While the proposal intends to strengthen liquidity, some community members warn of short-term market disruptions. A key concern is the potential impact of selling 140 million ADA onthe market price during a weak cycle. A well-known Cardano figure argued that the current market conditions make this action risky.
The ADA price recently declined by 5%, reflecting bearish market sentiment and reduced trading volumes. Critics suggest that converting ADA now could intensify the downtrend and harm long-term holders. Alternative strategies are being considered to reduce sell-side pressure and preserve value.
One suggested method involves using ADA to mint crypto-backed stablecoins instead of selling them directly. This approach would support DEX liquidity without increasing the circulating ADA supply. It could stabilize the token’s market performance while still addressing the liquidity issue.
Hoskinson Defends Plan and Cites Execution Strategy
Hoskinson dismissed claims that the conversion would hurt ADA’s price, stating that markets remain deep enough to absorb the move. He mentioned that execution could be handled via OTC deals or TWAPs to prevent large market swings. These strategies aim to ensure minimal disruption.
He added that the initiative could generate non-inflationary revenue for the Treasury, supporting ecosystem sustainability. The Treasury would not just gain liquidity but also increase its utility across DeFi protocols. As a result, Cardano could attract more builders and improve user retention.
The USDM stablecoin recently partnered with Lace Wallet, positioning itself as the dominant fiat-backed option on Cardano. This partnership adds credibility to the plan and supports Hoskinson’s vision of a more robust financial infrastructure. The proposal continues to gain attention amid ongoing network development.
