Frax Finance Proposes Integration of Real World Assets (RWAs)
The trend of leveraging yields from traditional financial instruments (RWAs) is becoming increasingly popular among DeFi protocols. Recently, Frax Finance has announced its proposal to integrate this approach.
Frax Finance's RWA Proposal
The proposal, titled FIP-277, focusing on Real World Assets (RWAs), was shared by founder Sam Kazemian on the Frax Finance forum. Specifically, the FRAX V3 version will integrate low-risk, near-cash instruments such as bonds to increase yields for its products.
The proposed strategies include:
- Holding FDIC-insured deposit accounts to earn interest;
- Supporting deposits and withdrawals of USDP Paxos and earning interest from transaction fees;
- Supporting deposits and withdrawals of USDC Circle and earning interest from transaction fees;
- Buying, selling, and holding government securities and bonds through aggregate accounts.
Establishment of FinresPBC
Frax Finance will establish a new entity, FinresPBC, to facilitate the transition of real-world assets to on-chain protocol. Founder Sam Kazemian stated that FinresPBC will strive to meet the requirements of the Federal Reserve Account Regulations (FMA).
FinresPBC's banking partner will be Lead Bank, a bank branch that supports services related to cryptocurrencies and is a member of the FDIC.
Similar Approaches in the DeFi Space
Previously, another stablecoin project, DAI, also opted for the approach of purchasing government bonds to back the circulating tokens while earning stable yields from these financial instruments.
This move by Frax Finance highlights the growing intersection between traditional finance and decentralized finance, aiming to provide stable and enhanced yields for DeFi users through the integration of real-world financial assets.
