From passive management to active management, the Ethereum Foundation's new fiscal strategy will regulate the sale of ETH

Roundup: Felix, PANews

Ethereum Foundation released its new fiscal policy on June 4, which outlines how the Foundation will manage reserves, deploy funds in DeFi protocols, and privacy evaluation criteria, while maintaining Ethereum's commitment to self-sovereignty and neutrality.

The Ethereum Foundation has announced that it will adopt a more structured and transparent reserve policy, tying operating costs and cash requirements to ETH reserves and sales to strengthen its financial position. This policy is very different from the foundation's historically passive capital stance.

Cutting back on spending and regulating the sale of ETH

The Ethereum Foundation's unexpected sale of ETH in recent months has sparked a backlash from the community, with some critics claiming that the Foundation's series of moves have undermined trust in the Foundation.

Or because of these doubts, the Foundation announced a complete 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 aligned with its long-term strategy.

The goal is to reduce annual spending from 15% to 5% of assets by 2030. Currently, the Ethereum Foundation is only 2.5 years away from running out of cash, so "the next 18 months will be critical."

In addition to this, the Foundation calculates the statutory reserve requirement by multiplying the fixed annual operating expense target (currently set at 15%) by 2.5 years of operating time. Automatically sell ETH only when cash reserves fall below the 2.5-year spending buffer (about 37.5% of the vault).

In addition, in order to continue the trend of working more closely with the DeFi ecosystem, the Foundation will also pursue funding strategies, including solo staking and the provision of wETH to yield-based lending protocols. It may also borrow stablecoins and seek higher on-chain yields through RWA exposure and DeFi allocation.

In keeping with its transparency commitments, 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 Foundation's total reserves are approximately $970.2 million, including $788.7 million in crypto assets and $181.5 million in non-crypto assets.

Adopting the "Defipunk" principle to evaluate DeFi protocols

, the policy also has a documented 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 set of criteria: permissionless access, self-custody, open-source licensing, and technical privacy features such as transaction masking.

DeFi protocols that fail to meet the criteria may still be eligible, but only if credible progress towards these ideals has been demonstrated.

The foundation also called on employees who are "involved in fund management" to also "upskill" by using open-source, privacy-preserving tools. Employees involved in financial management are expected to use and/or contribute to open-source privacy tools in order to complete their day-to-day work, especially if they need to improve their skills in the relevant field.

In the new policy, the Foundation underlines its commitment to the core values of "Cypherpunk". "Through research, advocacy, and strategic capital deployment, the Foundation can help foster an Ethereum-native financial ecosystem that asserts self-sovereignty and sustains an 'open society in the electronic age' at scale."

It is worth mentioning that this may also put the foundation at odds with regulatory trends in the United States and Europe, where policymakers are increasingly prioritizing transparency and compliance over crypto privacy.

Related reading: Ethereum Foundation's first public layoff, strategic adjustment sparked controversy again, and the foundation model failed?