Authors
Frax Core Team
Summary
This proposal seeks to delegate the full compliance infrastructure and collateral management of frxUSD to FRAX Inc (previously known as FinresPBC), the public benefit corporation responsible for regulatory operations. FRAX Inc will manage all issuer responsibilities—including collateral onboarding, compliance audits, custodian integrations—and will only retain sufficient revenue to cover its operational expenses for delegated operations. All surplus revenue generated from frxUSD issuance will be returned to the Frax DAO treasury to the benefit of FRAX (prev. FXS) token holders.
Background and Motivation
As Frax Finance advances toward GENIUS Bill regulatory compliance for frxUSD in anticipation of U.S. stablecoin legislation, it is crucial to unify the off-chain and legal components of the system in a formally structured and regulated entity. FRAX Inc is structured to serve as the operational entity responsible for issuing frxUSD and managing its underlying collateral in accordance with regulatory standards.
Currently, elements of the compliance process and collateral deployment are shared between the DAO and external entities, creating operational inefficiencies and regulatory ambiguity. This proposal fully transfers those responsibilities to FRAX Inc, while maintaining DAO oversight through revenue routing and the ability to override via governance vote in the future. This structure establishes a clear legal and operational boundary, supporting FRAX Inc’s pursuit of a payment stablecoin license and enabling full autonomy within regulated jurisdictions.
This proposal solves the need for FRAX Inc to perform important stablecoin issuance, compliance, and partnership activities without explicitly having to get affirmative approval from FRAX token holders for every action, an infeasible expectation that will be detrimental in competing with centralized issuers like Circle, Tether, Paxos etc.
Proposal Details
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Transfer Scope:
FRAX Inc will be authorized to permanently manage the full compliance operations and collateral composition for frxUSD. This includes:-
Onboarding and managing RWA custodians, regulated issuers (e.g., Blackrock, Fidelity, Superstate), opening/closing bank accounts, and creating relationships (including strategic partnerships) with institutions and associated entities for frxUSD expansion.
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Ensuring ongoing compliance with regulatory obligations and applying for the correct legal licensing within the United States (including associated costs and management). In particular, the FRAX Inc entity is delegated sole authority to structure the corporation, frxUSD balance sheet, and legal aspects of the business in any way its board and employees see fit to have frxUSD comply with, apply for, and receive the GENIUS Bill stablecoin license within the United States.
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Handle all intellectual property rights of Frax USD (frxUSD), the regulated stablecoin.
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DAO Revenue Rights:
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FRAX Inc will only retain enough income to cover operational and regulatory expenses (e.g., legal, audit). FRAX Inc will report annual breakdown of revenue, expenses, and profits (returned income) to the Frax DAO in a timely manner after every calendar end year of December 31st.
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All surplus profits generated from frxUSD operations will be transferred back to Frax DAO to the benefit of FRAX token holders.
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Governance Controls:
- A future governance vote may revoke, modify, or reassign this delegation.
Voting
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For: Approve the transfer of frxUSD compliance and collateral management to FRAX Inc, with DAO retention of all net revenue.
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Against: Do nothing.
