Banks Lobbying Against Stablecoin Yield, Says Frax VP
Frax Vice President Sean Kelley stated that traditional banks are actively lobbying to block yield-bearing stablecoins, which he views as a bullish signal for their inevitable growth. Kelley highlighted that Frax has secured a $50M investment from ATW and is deepening partnerships with firms like BlackRock and WisdomTree. He noted that institutions are using on-chain real-world asset vaults to generate yields superior to most TradFi products.
- The American Bankers Association (ABA) has designated the prevention of yield-bearing stablecoins as a primary focus for 2026, arguing they could function as deposit substitutes and negatively impact community bank lending. - Bank of America CEO Brian Moynihan has cautioned that the widespread adoption of interest-paying stablecoins could lead to an exodus of up to $6 trillion from the traditional banking system. - Frax's staked FRAX (sFRAX) is an ERC-4626 vault that generates yield by deploying its underlying assets into a variety of strategies, including real-world assets like U.S. Treasury bills, with the goal of matching or exceeding the Federal Reserve's Interest on Reserve Balances (IORB) rate. - The GENIUS Act, passed in 2025, prohibits stablecoin issuers from directly offering interest but contains a "loophole" that may permit third parties, such as crypto exchanges, to offer yield, a point of contention for banking lobbyists. - The Frax v3 upgrade is moving the FRAX stablecoin to a 100% collateralization model using a combination of algorithmic market operations (AMOs) and real-world assets held by partner entities. - Frax has established a public benefit corporation, FinresPBC, to hold cash and cash-equivalent assets, enabling the protocol to access yields from traditional financial assets to support sFRAX. - The $50M commitment from ATW Partners into frxUSD will be held in custody by BitGo, with reserves fully backed by tokenized U.S. Treasury exposure through WisdomTree's WTGXX vehicle on the FraxNet platform. - Regulatory bodies in other jurisdictions, such as the European Union's Markets in Crypto-Assets (MiCA) regulation, have taken a clearer stance by generally prohibiting issuers of e-money and asset-referenced tokens from paying interest.
