Not issuing dividends but offering "cashback"? Frax founder reveals: how to legally and compliantly access relief funds

Compile: Plain Language Blockchain

As the global cryptocurrency market closely monitors Bitcoin’s volatility, a “silent war” that will determine the fate of stablecoins has quietly begun in Washington, D.C. Is the revised latest “Clarity Act” a compliance boon for the industry, or is it a “loyalty oath” handed over by politicians to traditional banks?

In this issue of “Stabled Up,” we have an in-depth conversation with FRA founder Sam, uncovering the shocking interests and games behind the framework: Why is the compliance process unexpectedly making Tether a winner? With Binance’s policy of “prohibiting payment yields,” how is the veteran DeFi player leveraging the innovative logic of “charity cash back” to achieve a remarkable comeback?

From a leap of $200 billion to $3 trillion, the second half of stablecoins is no longer a simple market cap competition but a stair-step rise in conjunction with the traditional banking system, value policies, and geopolitical dynamics. If you want to see through the future investment models of two stablecoins and understand the ultimate evolution of “money protocols,” this article will provide you with the most cutting-edge survival and profit guide.

Feedback from the DC Lobbying Front: The Political Tug-of-War for Clarity and Compensation

Host: Welcome back to episode 25 of “Stabled Up.” Today, we are very honored to invite FRA founder Sam. Sam, it’s great to have you back. We just wrapped up our trip to Washington, D.C. where a lot happened. Rob, Sam, how have you both been, brothers?

Sam: I’m good, thanks. It has indeed been a while since we last met. So, it was your turn to run the DC circuit, right?

Host: Yes, the baton has been passed smoothly. I was thinking the other day that for the “Genius Act,” I basically lived in D.C. last March. Now Fracks is secretly developing a lot of exciting things in the lab, while you all are holding the fort. Sam, you’ve laid a solid foundation, so we have plenty of material to discuss when we go.

Clearly, the latest situation is that we just went through a storm regarding the latest resolution. I mentioned before you joined that it feels like the politicians sold us out. They claimed to have proposed a great resolution regarding stablecoin yields, but this so-called “great resolution” actually states that stablecoins are not allowed to have any yields. It feels less like a resolution and more like a victory for bankers, as no founder from the crypto industry would sign such a consent clause before. What is your reaction to this so-called “resolution” from D.C.?

Sam: Yes, I’ve been closely following this matter. But first, I want to clarify the background for everyone: for those who haven’t deeply thought about political operations, this is purely a political game. This halt in funding will not stop because of yield issues, and it won’t even stop after the “Clarity Act” is passed.

In the U.S., it’s like the issue of the Second Amendment (the right to bear arms), always tugging between two sides. Just because a bill is passed doesn’t mean the discussion is over. Politicians might pass a bill saying you cannot have magazines over a certain capacity, and then the next time they might say you cannot have guns over a certain length. They will push forward step by step. This is how politics operates, and it relates to the specific details concerning stablecoin yields.

With the “Genius Act,” we almost achieved an overwhelming victory last year. The only concession at the time was that issuers could not assert any kind of legal or expected right that holding such compliant stablecoins would confer such legal rights. This isn’t a problem, as very few issuers would directly make such a promise. But you could give yields to the issuers, like centralized exchange partners, to distribute yield statements. However, under the current amendment of the “Clarity Act,” this is basically prohibited.

You will see some “activity”-based structures. For example, Coinbase must consider that they can no longer simply call it “USDC Earn,” but must emphasize “if you log in and engage in trading activities.” If this bill passes in its current form, under a less friendly SEC environment, regulators may issue guidance saying that so-called “activities” cannot just be actions without substantial economic reality. They will restrict you, saying you cannot just log in to earn rewards. People in the crypto industry might not be used to politics being a continuous process rather than a one-time hammering down of decisions.

The Changing Landscape of Interests: Who are the True Winners in the Compliance Game?

Host: According to your logic, this wording modification seems to filter different types of players. Now that there are heavy barriers to directly distributing yields, who do you think will benefit from this situation?

Sam: Honestly, while this isn’t ideal for the overall industry, it is actually very beneficial for the DeFi sector and for stablecoin teams with strong underlying technology like FRA. In contrast, centralized profit projects like Coinbase are less reliable.

In fact, I believe that under the current wording, besides the banking lobbying group, the biggest beneficiary is probably Tether. Because Tether has never paid yields to users, and now their competitors (like Circle) find it harder to pay yields in an open and compliant manner.

Additionally, teams like FRAUSD that have “Genius Act” compatibility are also beneficiaries. We have established extensive partnerships, and if you put FRAUSD into the liquidity pool of Curve, the v4 version we are launching next week will have a significant feature: we will provide actual risk-free yields (risk-free interest rates) as the basis for streaming yield. It will become an important foundational asset, a hub mixed asset, and a leveraged asset. As we are already distributing risk-free yields based on activities, this regulatory environment actually highlights our structural advantages.

Host: You sound quite confident. Since this is only part of the political evolution, they will nibble away at interests bit by bit. Do you believe Coinbase’s Brian Armstrong will delay pushing this bill through? We spoke with the CEO of the Solana Policy Institute, who said we must accept the trade-off: either get it done before Congress breaks in July, or delay until 2027. There has just been news that Coinbase will oppose the current version of the bill.

Sam: Brian’s opposition is not surprising. But let me ask it this way: does Brian really have the power to sign off on this? My understanding is that politicians can push hard regardless of the crypto industry’s sentiments. They just don’t want to offend anyone, while both banks and the crypto industry have large actions. If the politicians gain far more leverage from one side than the other, they will lean that way.

The “Genius Act” is already very perfect, which is why traditional financial forces are now trying to amend it. Given the balanced elections and the current macro situation, if it cannot pass before July, the future becomes hard to predict. But I believe this may be the last or second-to-last revision. Regardless of whether the “Clarity Act” passes, we at Fracks are quite excited. Our core business is to provide risk-free yields in the form of secure stablecoins on the most important on-chain nodes (like Curve pools, AMMs, Bitcoin platforms).

From Yields to “Cash Back”: Compliance Innovations in DeFi and New Banking

Host: You mentioned the “activity-based” distribution model. How does this manifest in real-world payment scenarios beyond on-chain DeFi protocols?

Sam: This is a very interesting conversion process. For example, we are working with EtherFi to develop a card. You can design a system where users swipe a bunch of “Genius Act” compliant stablecoins on the card, and we calculate the “activity volume” based on the user’s card frequency, time weight, and balance using an algorithm.

The interesting part is that if you pay these accumulated yields in the form of cash back, it is not technically a taxable event. The IRS has clearly stated that credit card cash back does not need to be reported on the annual tax return; it is viewed as a discount or rebate, rather than new income. Through this well-integrated DeFi layout, with the cooperation of new banking teams, we can transform this activity-based mandatory requirement into a highly attractive new product—users essentially receive risk-free and fiscal yields, rather than traditional dividends.

Host: So the EtherFi card is a typical example of how to translate complex regulatory requirements into a compliant structure that benefits end users.

Sam: Exactly, and this is already live. The EtherFi team is outstanding; they have already integrated the risk rates of FRXUSD and distribute them daily based on activity and holdings. If you are a U.S. user, this model is very advantageous under the current rules.

Host: I’m curious, you mentioned that the “Genius Act” was initially basically perfect. Why do you think bankers were able to push it through so easily? Were they negligent at that time?

Sam: They absolutely were not negligent. People in D.C. will tell you that those banking lobbyists have been pursuing it. But they were indeed caught off guard by the speed of changes in the industry after the November elections. Everyone suddenly became super pro-crypto, and the bill was pushed through much faster than expected. Moreover, the authors of the Lummis and Hagerty bills are very professional and are excellent leaders in the crypto industry.

Banks did try to apply soft resistance, but now that the “Genius Act” has passed, the cat is out of the bag. Compliant secure stablecoins have already begun to be used in important areas. The only question now is: at what level will yields be allowed to be distributed? Who can provide the most diverse user experience?

Leap Growth: The Vision for Stablecoins in 2027 and the $3 Trillion Target

Host: Sam, regarding this legislation. Do you think we should persist in pushing for the passage of the “Clarity Act”? Compromise on the yield issue. We need its main purpose to guide it into law to prevent future SEC chair variations. But if the law can be easily modified, where is its critical significance?

Sam: Legislation and amendments are indeed very difficult to modify, which is why banks are currently pushing obstacles. The guidance from Chair Atkins is now in place, but guidance can change with government rotations. The former chair did not clearly provide guidance because he understood politics; once he set the rules, the industry would quickly innovate (like shifting from ICOs to points programs) to circumvent them.

The “Clarity Act” is a pro-crypto bill. It makes it difficult for those politically opposed to cryptocurrency to easily rescind existing good guidance. It is not the end; new amendments will definitely be stuffed into large spending bills by 2027. But as an important milestone, I am clearly very supportive of passing it.

Host: Regarding the future dynamics of stablecoins, you mentioned the competition between Tether and Circle. We also see Tether is hiring the big four audit firms. Do you think Circle’s regulatory arbitrage advantage will be greatly impacted by this bill?

Sam: As I said, Tether wins in their current situation of not needing to pay yields, aligning with the new bill. And the real breakout point occupies a lot of banking access. We are in communication with banks and new banks. I have a hunch that in 6 to 12 months, we will find that many mainstream banks, Visa, and even institutions like Wells Fargo will start accepting some compliant stablecoins as actual deposits.

Once you can directly transfer stablecoins into traditional bank accounts or send them directly to real estate custodians for home purchases without going through a complex conversion process, the total market cap of stablecoins will leap. Currently, it’s about $200 billion, but it could jump to $500 billion in just a few months. This process is a slow accumulation, followed by a sudden leap.

Host: Scott Bessent predicts that the market cap of stablecoins will reach $3 trillion by 2028. Do you think this expectation is realistic?

Sam: While I don’t know if he reaches the actual breaking point or potential war risks, I still believe this estimate is valid. It won’t be a linear slow rise but will manifest in a step function. Once the infrastructure matures, some stablecoins will become true global currencies.

Host: For beginners, could you clarify this structure?

Sam: The market is maturing increasingly, able to accurately distinguish assets. For example, Circle’s stock recently dropped 20% due to bill adjustment commentary, as the market realized that their issuance model was hit the hardest, indicating that investors already know how to price these differences.

Stablecoin investments now have several different dimensions: Sky is a good yield-focused DeFi stablecoin; Athena has its unique hedging argument; and for currency-based stablecoins like FRAUSD targeting the trillion-dollar market, their value lies in on-chain deep penetration. If you want to position yourself, you need to see who is being used in the most important places on-chain, and who is held by the most cutting-edge new bank products. This “footprint” on-chain will determine who ultimately makes it onto the bank’s whitelist.

Host: Sam, thank you very much for your sharing today. Your unique insights on the “Clarity Act” have inspired many people. Currently, prediction markets show that the probability of the bill being signed in 2026 is 61%. I hope that by the time you come back next time, we have crossed this milestone.

Sam: Thank you for having me, brothers. See you next time.

Article link: https://www.hellobtc.com/kp/du/03/6269.html

Source: