Polygon community reviews plan to activate $1 Bi in stablecoin reserves
Polygon Stablecoin Reserves
The Polygon community is currently evaluating a groundbreaking proposal to deploy over $1 billion in dormant stablecoin reserves, including USDT, DAI, and USDC, held on the Polygon PoS bridge.
The plan, led by DeFi protocols Morpho, Yearn, and Web3 risk provider Allez Labs, seeks to generate significant yields while fostering growth within the Polygon DeFi ecosystem.
Deploying Stablecoins for Yield and Growth
According to the Pre-Polygon Improvement Proposal (Pre-PIP), the initiative would gradually deploy stablecoin liquidity into ERC-4626 vaults. Each stablecoin’s deployment would be guided by a specific Polygon Improvement Proposal (PIP) to ensure security and oversight.
Under the proposed structure, Morpho Vaults and Markets would serve as the primary liquidity source, while Allez Labs would manage risk. Yearn would oversee system rewards. USDT and USDC reserves would be deployed into Morpho Vaults, as neither asset has native yield-bearing wrappers. DAI, on the other hand, would be placed into Maker’s sUSDS vault.
The authors further proposed the use of DeFi-native yield-bearing collaterals like USTB from Superstate, sUSDS from Maker, and stUSD from Angle. Combined, these moves are projected to generate over $70 million in annual returns based on current lending rates, with some Polygon insiders estimating the yields could reach as high as $90 million.
Paul Frambot, CEO of Morpho Labs, described the proposal as a “$50-90 million opportunity” to capitalize on previously idle funds. Crypto Texan, DeFi Growth Lead at Polygon, echoed this sentiment, stating that the proposal could establish Polygon as a leader in sustainable DeFi innovation.
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If approved, the plan would operate under strict security measures, including a 72-hour time-lock for risk adjustments and a veto option retained by the Polygon Protocol Council. The proposal’s authors emphasized that API functionality for bridging operations would remain unchanged, though gas fees for certain transactions could increase.
The initiative is part of Polygon’s broader effort to strengthen its DeFi ecosystem, aligning with its Polygon 2.0 roadmap and its transition from the MATIC token to the POL token, which began in September 2024.
Polygon has adopted AUSD stablecoin as its native currency, streamlining cross-chain transactions and liquidity management. The partnership introduces a fiat-backed asset that enables multi chain activity and simplifies the user and developer experience across Web3.
