Frax Founder: The Future Of Stablecoins & Onchain Businesses (Why Now)

**Robbie** (0:00)
Welcome back to the Tokenization Tower. You're watching The Rollup, episode number 36 of StableUp, our weekly premier stablecoin show, none other than Sam in the Tower. Good to have you, Sam.
How's New York treating you?

**Sam Kazemian** (0:12)
Excellent, man, this is so cool. This is like, I feel like New York and SF are like the two pillars of tech, AI and crypto and finance. So this is awesome.

**Robbie** (0:21)
Yeah, man, it's all the ads in the subway are AI ads now. So the SF culture is infiltrated here, for sure.

**Sam Kazemian** (0:30)
Yeah, I saw a bunch of crypto. I saw some Ripple and other stuff.

**Robbie** (0:33)
Nice.
Well, one of the notable things, Sam, today and this week is action on the Genius Act, kind of getting that into law. You know, we were just talking about prior to this going live, just about there's a couple more things. Could you just catch us up on what's happened there with the Genius Act? What is left to get this thing into law?

**Sam Kazemian** (0:53)
Yeah, I mean, I think legally speaking, it's technically law. It's just that the OCC and the federal agencies that have been tasked with actually giving guidance and the process to apply for like a Genius license or I guess technically a payment stablecoin issuance license need to go through with all of the comments, rulemaking, final releases of the actual procedures and everything. And I think for short, TLDR, I think by Q1, 2027, I think it should be open for business, which obviously we're hoping with Frax, we'll have Frax Usd be licensed Genius stablecoin. Now, one thing that I will say is that since it's on default acceptance, right, the way that it's going to work is that you apply and if unless there's a very specific response of no for a specific reason, I believe it's 120 days of auto default in compliance.

**Robbie** (1:52)
Okay.

**Sam Kazemian** (1:53)
And so I think that's what's going to be really great for innovation because unless you're doing something extraordinarily wrong and you get a no, it's a default yes, whereas the FMA and Fed Master account and all that stuff, right? It's a default is no. So then the Fed used to always be able to just leave it for years, right? And just say, well, we don't know how risky this new bank or whatever is. And that's just a political way of saying F you, right? Because this is the exact opposite of that, which is really good.

**Robbie** (2:23)
That's bullish. Yeah, that's great. Well, great, great. Just wanted a quick update there. Really today, I wanted to just kind of have a Frax specific conversation about the business of Frax. And kind of as we're in this very institutional era of this industry, I coined this term revenue meta a year and a half ago. It's a very silly term. Got a lot of flack for it. But we're very firmly in this era of, I'm an investor, I'm looking at Frax. I want to understand business model, revenues, token flows, emissions, net value flows, how these things are coming together, what the stable coin business is doing, how it makes sense for me, like why Frax is an investible company, investible asset with a token that is obviously separate from a stable coin. So stable coins are obviously one of the pillars of this era, right? Perps, tokenization, stable coins, I think are like the big three. So you guys are in a really strong spot here. Just kind of, let's just get a high level of the Frax business model.
How does Frax generate fees, generate cash flows? What is the business model of Frax as it is now? And then looking forward, let's start here high level and kind of just get into the weeds about what the investability of Frax is.

**Sam Kazemian** (3:34)
Yeah, for sure. So obviously, the flagship product is FRX Usd. It's a genius compliance stable coin, right? And we like to say it's a Frax is a stable coin operating system, means it's a verticalized stable coin stack, right? That we have. And one of the most interesting things actually brought up the genius act and also the clarity act is coming out and maybe it'll pass and maybe it won't. I think there's a high chance it will.
What we actually do with Frax Usd is we get it integrated in the most DeFi important hubs, right? So Aave's new V4, actually the Frax Usd is currently like the largest stable coin there.
We're working directly with them. There's a lot of curve pools. And so what we do is we actually stream the risk free rate to these important DeFi hubs. And we make it so that this is the default digital dollar that's compliant, that is fully redeemable, that can be used as payments and is one to one, right? At all times, the entire supply can be redeemed in T plus one, right? For cash if you want to, or one to one and other major stable coins. And the idea here is like all of these places, like Aave, if you lend Frax Usd, you'll get streamed the risk for yield as a baseline instead of other stable coins. It's not like a campaign that's like done in a month or something, it's actually a mechanism. And so we've built this out.