Polygon DAO is considering a proposal to deploy over $1 billion in idle stablecoin reserves, which are currently stored on the Polygon PoS Chain bridge, in order to generate annual yield. According to a pre-proposal post, the stablecoins, which amount to around $1.3 billion, represent a large pool of dormant assets that could be better utilized within the ecosystem.

The proposal points out that the current on-chain holding of these stablecoins represents an opportunity cost of about $70 million annually, based on the benchmark lending rates for the top stablecoins. It argues that with the maturation of decentralized finance (DeFi), the Polygon PoS Bridge’s stablecoin reserves could be put to productive use, increasing overall network activity and value.

To achieve this, the proposal outlines a plan to use Morpho Labs’ vaults for managing stablecoins such as USDC and USDT, targeting a conservative 7% return per year. The strategy involves deploying stablecoins into high-quality collateral assets like USTB, sUSDS, and stUSD.

If the plan proceeds, Polygon could generate an additional $70 million annually from these idle reserves. The earnings would be reinvested back into the Polygon ecosystem to drive growth and support ongoing projects. As part of the process, each stablecoin deployment will require a separate proposal and community approval before being allocated to decentralized finance (DeFi) protocols.

Should the proposal pass, it would mark a significant move towards leveraging the existing stablecoin reserves for the benefit of the Polygon network. Polygon’s POL token has experienced a 5% decrease in value in the last 24 hours, aligning with broader trends in the cryptocurrency market.