Former Fed Nominee Moore Announces New Stablecoin

Economist Stephen Moore, who recently lost out on a bid to join the board of the Federal Reserve, is looking to launch his own cryptocurrency product, Fortune reported on Monday (Oct. 21). Moore and other entrepreneurs are seeking to start a digital stablecoin — Frax — as a “new type of central bank” to stabilize cryptocurrencies like bitcoin.

Earlier this year, U.S. President Donald Trump tapped Stephen Moore to join the Federal Reserve. When the nomination fell short, Moore decided to manage Frax.

Moore and his partners are expected to officially announce plans for the coin, which will be pegged to the U.S. dollar, and said the digital currency will rely on the established blockchains. He told Fortune that launching the cryptocurrency is aligned with his libertarian views, and he believes digital currency is “an important 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,” said Moore. “It’s very healthy for private competitors to challenge central banks over the money supply.”

Joining Moore as the coin’s co-founder is entrepreneur Sam Kazemian. The pair have said that Frax will launch in the coming months.

No outside investors have stepped up so far to launch Frax, and it’s not the first stablecoin. Facebook’s plan for the stablecoin Libra will be pegged to major currencies.

Frax will rely on a fractional reserve, which means it won’t be backed by a one-to-one pool of reserve dollars. Instead, Frax will rely on algorithms to loan out its reserves and collect interest, while also keeping the value of Frax pegged to a dollar. According to the company, the loans will all be recorded on a blockchain, eliminating the need for a central bank.

The intergovernmental organization Financial Action Task Force (FATF) said it is worried about stablecoins and how they could be used for illicit purposes. The group is concerned that the potential widespread adoption of stablecoins would cut out regulatory agencies, and make it easier for criminals to break the law with the currency.