Former Fed Nominee Stephen Moore Backs Fractional Reserve Stablecoin

Stephen Moore, who backed out from a nomination to the Federal Reserve Board of Governors, is now trying to upend central banks.

On Monday, the economist announced his involvement with Frax, a stablecoin backed by a fractional reserve.

Coming via a partnership with Sam Kazemian, CEO of Wikipedia rival Everpedia, the stablecoin would be pegged to the value of the dollar but not necessarily backed one-for-one with greenbacks.

How? Kazemian explained in an interview with Crowdfund Insider last month that Frax will be managed in a system similar to what traditional economists understand as fractional-reserve banking.

Tying this back to Frax, Kazemian said the stablecoin will be an "Algorithmic, fractional-reserve stablecoin." This suggests part of the value backing Frax will be deployed in profit-earning endeavors to ultimately increase the wealth of the system.

"This is similar to how a central bank buys back currency with bonds by issuing debt."

Backing a stablecoin with a fractional reserve has been done before, including with Saga, a non-anonymous stablecoin tied to International Monetary fund assets and governed by a board of economic notables.

"The days of government monopoly of currencies by central bankers is coming to a screeching halt."

Though the central bank has been engaging in an internal debate over the merits of issuing a digital dollar, many high-level officials have publicly met competing cryptocurrencies with open disdain.

"If a large share of domestic households and businesses come to rely on a global stablecoin not only as a means of payment but also as a store of value, this could shrink demand for physical cash and affect the size of the central bank's balance sheet."