A former campaign adviser to United States President Donald Trump is planning to release a stablecoin based on a fractional reserve.
As Fortune reported on Oct. 21, Stephen Moore announced plans to launch a stablecoin dubbed Frax, which will be backed by a fractional reserve of U.S. dollars.
As such, the planned stablecoin will not be pegged one-to-one to a reserve of dollars but is based on algorithms that will loan out its reserves and gain interest in order to make certain that the value of the coin remains fixed to the dollar.
Moore and his business partner and co-founder of Frax, Sam Kazemian, said that the stablecoin — which is expected to be launched in the coming months — will be built upon established blockchains that ensure a tamper-resistant public record.
Moore sees cryptocurrency as an alternative to government currencies
Moore, who is also an economist at the Heritage Foundation — a conservative think tank — argued that cryptocurrency could be an alternative to state-backed money:
“I’ve followed 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. [...] If I had been on the Fed, I would like to have seen encouragement for the development of cryptocurrencies like Frax. It can be a check and balance against runaway currencies.”
This summer, Moore joined a new crypto project dubbed “Decentral,” which counts Kazemian as CEO and Mike Novogratz — the founder of crypto merchant bank Galaxy Digital — as a purported investor. At the time, Decentral was also planning to issue a fiat/asset-pegged or algorithmically stabilized stablecoin.
Decentral pitched itself as a platform that will assume responsibilities similar to the U.S. Federal Reserve within the cryptocurrency space, such as regulating monetary supply and exchanging its own token for other cryptocurrencies.
Previously, Moore commented on Facebook’s not-yet-released Libra stablecoin, stating that “it’s interesting, because this [Libra] represents a new challenge for central bankers that they now have competition from private currencies.”
Meanwhile, G20 finance leaders agreed that global acceptance of stablecoins will give rise to a set of serious public policy and regulatory risks.