Polygon DAO is considering a proposal to utilize over $1 billion in idle stablecoin reserves currently held on the Polygon PoS Chain bridge, aiming to generate annual yields. According to a pre-proposal governance post, these stablecoins, totaling around $1.3 billion, represent one of the largest on-chain stablecoin holdings that remain largely inactive.

The pre-proposal highlights the missed opportunity cost, estimating an annual loss of about $70 million based on current lending rates for major stablecoins. The authors argue that with the maturity of decentralized finance (DeFi), these assets could be put to work productively, unlocking value for the Polygon ecosystem.

The proposal suggests using Morpho Labs’ vaults to manage stablecoins like USDC and USDT, targeting a conservative 7% annual return through high-quality collateral strategies such as USTB, sUSDS, and stUSD.

By deploying these idle assets, Polygon could generate an additional $70 million annually, which would be reinvested into the network to fuel growth and expansion. The proposal outlines a gradual approach to deploying stablecoins like DAI, USDC, and USDT into DeFi protocols, with each asset requiring its own community proposal for approval.

If the proposal clears the community check, it could help Polygon leverage its reserve assets to enhance its ecosystem. Meanwhile, Polygon’s POL token has seen a 5% drop in the last 24 hours, following a broader market downturn.