Jeff Cangialosi

Last week Wyoming announced the launch of its own stable token “Frontier Stable Token” (FRNT). As those closely watching crypto know, Wyoming has been all in on digital assets for almost a decade now. The state has actively courted the industry with favorable regulation and is home to the popular exchange Kraken. Wyoming has passed 45+ digital asset laws since 2016! Here are some of the key highlights about the token:

• Fiat-backed – Like the major stables (USDT and USDC) it will be a mix of cash deposits and US treasuries that back FRNT. Franklin Templeton will manage the treasury. 
• Overcollateralized – For every 1 FRNT, there will be $1.02 in reserve. It is unclear to me who is paying for that over-collateralization. Presumably, it will be the buyer of FRNT who needs to fork over $1.02 to acquire 1 FRNT. While the additional reserves may increase the perceived safety of the stablecoin, it will be interesting if this added cost will dissuade purchasers of the token.
• Compliance uncertainty – From the takes I’ve read so far, it is still unclear how FRNT lines up with GENIUS. The new GENIUS bill did not specify a path for state-issued stablecoins; it was more focused on private issuance. It will be interesting to see how this plays out. Wyoming has put in place its own audit framework and controls to manage the token, but what happens when every state does this? Will federal regulators have oversight?
• Multi-chain – The new token will be available across 7 different blockchains from day 1. This is particularly impressive as even private issuers like PayPal or Stripe typically only launch on one or two chains out the gate.
• Distribution – A set of authorized sellers and exchanges will be able to offer the token. All purchasers of the token will need to pass KYC.

Earlier this year I had to go through the process of getting a money order at the post office to then send approximately $2 for a fee due to the IRS. There is no doubt that there is opportunity to upgrade and digitize many of the ways in which federal, state, and local governments are paid and issue payments in the US. Ideally FRNT is a step in the direction of modernizing state financial infrastructure, with Wyoming clearly providing other states with a blueprint. The fact that Wyoming will retain the interest earned on the stablecoin reserves to then invest in state programs, like education, is also an interesting experiment from a public policy perspective. It’s almost a new way of creating a sovereign wealth fund.

Ultimately, I think this one opens more questions than it answers and brings another cohort of stablecoin issuers into what I believe will become an increasingly crowded space in the coming months. Will end users feel more comfortable holding FRNT because it has state backing vs. holding USDC or USDT? What happens when more states issue stablecoins, and end users are left sorting between a mix private and public stables? As I’ve mentioned before, we’re going to need some sort of blue chip mark or rating system (think a AAA-rated stablecoin) that allows end users to more easily navigate all the different stablecoins they will be confronted with.

There is never a dull week in the stablecoin world these days. I’m sure there will be more to come on this one as FRNT starts to go into circulation this fall.