Stephen Moore, an economic commentator and a former member of The Wall Street Journal editorial board, will launch a stablecoin dubbed Frax. The coin will be pegged to the U.S. dollar, providing stability but differing from other stablecoins in that it will rely on a fractional reserve system. Moore is also President Trump’s former pick for the Federal Reserve board.
A New Stablecoin
Stephen Moore has been vocal in opposing the Federal Reserve’s current plans and interest rate raises. He’s a long-time television commentator on economic issues and a writer for several financial media outlets. Most recently, he has been commenting on the government’s “monopoly” on the U.S. dollar, and launching a stablecoin appears to be a logical next step.
Interestingly enough, Stephen Moore was picked by President Donald Trump to join the Federal Reserve and help manage the U.S. dollar earlier this year, but he wasn’t confirmed. He was also Trump’s adviser for his 2016 presidential campaign.
Moore believes that a private competitor challenging central banks is generally a good idea:
“I’ve followed the monetary policy for 30 years and always been troubled by the government monopoly on currency, which is unhealthy for markets. It’s very healthy for private competitors to challenge central banks over the money supply.”
More information and an official announcement will be shared this Thursday. It’s already known that besides Moore, the other co-founder is Sam Kazemian, who has already launched a blockchain-based product.
Is it Really a Stablecoin?
By definition, a stablecoin is a cryptocurrency which is pegged to a relatively stable asset, generally a fiat currency or gold. Frax may raise eyebrows in this regard, as it will depend on a fractional reserve.
It will reportedly rely on algorithms to loan out its reserves and collect interest, all recorded on a blockchain. The interest will ensure that the stablecoin remains pegged to the dollar. However, this means that it will not have one-to-one pool backing of reserve dollars.
Earlier this year, Tether, the most widely-used stablecoin, made a change in this respect. The company quietly disclosed that “…from time to time, [backing] may include other assets and receivables from loans made by Tether to third parties…” Needless to say, the crypto community lashed out, as Tether didn’t appear to be fully backed by traditional currency and cash.
The question remains as to whether a similar stablecoin not fully backed by traditional currencies is what the market needs now.
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