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Current stablecoin regulation is reactionary: Frax co-founder


 

Frax's protocol works by targeting the open market

Sam Kazemian, the co-founder of Frax Finance, a decentralized stablecoin cryptocurrency protocol, said that regulatory action against stablecoins mainly affects those backed by traditional financial assets.

In an interview with Cointelegraph, Kazemian explained that the globally proposed stablecoin regulations can be viewed as reactionary as they mandate banking licenses for stablecoin issuers such as Circle and Tether.

He emphasized the need for discussion on the subject of regulation and pointed out that a lot of experimentation should also be carried out in the traditional financial area:

“Things like money market funds don't have a banking charter. It's not a bank. It is not insured by FDIC (Federal Deposit Insurance Corporation). People either do not notice it or they are not informed. "

Kazemian believes that such regulatory barriers do not particularly affect truly decentralized stablecoins like Frax, as they have absolutely no real asset claims and do not advertise any form of redemption.

Not only does Frax meet all of the requirements, but its nature as a fully decentralized company ensures it can comply with all future regulations, Kazemian said, adding that the whole point of Frax is that its protocol is open-market oriented.

When asked what sets Frax apart from the many algorithmic stablecoins out there, the co-founder replied that Frax's system, where the protocol expands and contracts supply at various points across blockchain protocols, and the exchange rates of the Frax stablecoin targeted in the open market, make it special.

“We like to compare it to a central bank. When it issues a currency, it never says, 'Hey, you can cash it in for that amount of gold or cash it in at the central bank for something pegged to the dollar,' ” Kazemian explained.

He added that the company's algorithmic stablecoin thesis was developed on this theory and Frax never broke its bond, not even during the May market crash.

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