Frax Founder Proposes Expansion Into Real-World Assets

Frax founder Sam Kazemian has proposed using a US corporation as a conduit for Frax to custody cash deposits, reverse repo contracts, Treasury bills, and other traditional financial instruments.

FinresPBC is a non-profit C corporation domiciled in Delaware “to provide the Frax Protocol access to safe cash-equivalent assets and near-Fed rate yields for the benefit of all without seeking to profit from this relationship or charge fees,” wrote Kazemian.

“FRAX v3 has a unique system of managing its off-chain risk that hasn't been built before. Our RWA [Real World Asset] strategy, unique BAMM [Borrow AMM] loans and debt system makes it so that constant redemptions of real-world fiat or treasuries aren't needed to keep FRAX v3 stable,” Kazemian told The Defiant.

FRAX is the sixth-largest stablecoin with a market capitalization of just over $800M. The project’s FXS governance token is up nearly 8% in the past two weeks.

In the proposal, now up for debate for the next three days before voting commences, Kazemian detailed how the partnership with FinresPBC will benefit the platform’s FRAX v3 RWA asset strategy, which will bring traditional financial assets on-chain.

FinresPBC is capable of holding US dollar deposits in FDIC Insured IntraFi savings accounts and earning interest on those deposits. Additionally, it manages the mints and redemptions of Paxos’ USDP and Circle’s USDC stablecoins, as required by the Frax protocol. The company may also hold, purchase, and sell United States Treasury bills in segregated brokerage accounts.

Operating at Cost

FinresPBC will deduct operating costs from yield generated on assets the company holds on Frax’s behalf, but otherwise return the rest of the yield directly to the protocol. The company takes no part in platform governance or development, nor does it partake in additional for-profit activity.

FinresPBC also does not use or pledge the reserves held on behalf of the Frax Protocol for any other purposes, according to Kazemian, who said that the company’s “sole public benefit mission is to give on-chain users access to offchain ‘cash-equivalent RWAs.’”

Partnership with Lead Bank

Lead Bank, a Kansas-based regional bank, is acting as FinresPBC’s partner, and the company is “actively expanding its banking and financial relationships with compliant & crypto friendly financial partners,” which includes full-service banks.

For the sake of transparency, FinresPBC will provide a monthly assessment of the assets and reserves it holds on behalf of the Frax protocol in addition to a report of maintenance costs incurred.