From passive management to active management, the Ethereum Foundation's new financial strategy will regulate ETH sales.

Overview: Felix, PANews

The Ethereum Foundation released a new financial policy on June 4, outlining how the foundation will manage reserves, deploy funds in DeFi protocols, and the standards for privacy assessments, while upholding Ethereum’s commitment to autonomy, sovereignty, and neutrality.

The Ethereum Foundation has announced that it will adopt a more structured and transparent reserve policy that links operating costs and cash needs to ETH reserves and sales, in order to enhance its financial condition. This policy is in stark contrast to the foundation’s historically passive capital stance.

Reduce expenses and standardize the sale of ETH

In recent months, the unexpected sale of ETH by the Ethereum Foundation has sparked strong opposition from the community, with some critics claiming that the series of actions by the foundation has undermined people’s trust in it.

Or because of these doubts, the Foundation announced a comprehensive update of its asset management strategy. The Foundation’s annual operating costs (measured as a percentage of Foundation funds) and years of operation will be reassessed periodically, taking into account market dynamics and community input, to ensure that the Foundation’s short-term operations are consistent with its long-term strategy.

The goal is to reduce annual spending from 15% of assets to 5% by 2030. Currently, the Ethereum Foundation has only 2.5 years left until cash runs out, so “the next 18 months will be crucial.”

In addition, the foundation calculates the statutory reserve requirement by multiplying the fixed annual operating expense target (currently set at 15%) by a run time of 2.5 years. ETH is only automatically sold when cash reserves fall below the 2.5 year expenditure buffer (approximately 37.5% of the treasury).

In addition, to continue the trend of closer cooperation with the DeFi ecosystem, the foundation will also implement financing strategies, including individual staking and providing wETH to yield-generating lending protocols. It may also borrow stablecoins and seek higher on-chain yields through RWA exposure and DeFi configurations.

To fulfill its transparency commitment, the foundation will also publish quarterly and annual reports outlining its asset holdings, investment performance, and any significant developments during each period.

As of October 31, 2024, the total reserves of the foundation amount to approximately $970.2 million, which includes $788.7 million in cryptocurrency assets and $181.5 million in non-cryptocurrency assets.

evaluates DeFi protocols based on the “Defipunk” principle.

The policy also includes a written commitment to privacy, which the foundation defines as “a fundamental civil liberty” in an increasingly monitored financial environment.

Through a new internal rule called “Defipunk”, the foundation will evaluate potential DeFi partners based on a series of criteria: permissionless access, self-custody, open-source licensing, and technical privacy features such as trade blocking.

Underperforming DeFi protocols may still qualify, provided that credible progress has been demonstrated in achieving these ideals.

The foundation also urges employees involved in “fund management” to “enhance their skills” by using open-source, privacy-protecting tools. Employees engaged in financial management should use open-source privacy protection tools and/or contribute to them to carry out their daily work, especially when there is a need to enhance skills in related areas.

In the new policy, the foundation emphasized its commitment to the core values of “cypherpunk.” “Through research, advocacy, and strategic capital deployment, the foundation can help nurture an Ethereum-native financial ecosystem to uphold autonomy and maintain an ‘open society of the electronic age’ on a large scale.”

It is worth mentioning that this may also put the foundation at odds with regulatory trends in the United States and Europe, as policymakers in these countries are increasingly focusing on transparency and compliance rather than crypto privacy.

Related reading: Ethereum Foundation publicly lays off for the first time, strategic adjustments spark controversy, is the foundation model no longer viable?