Legacy Frax Dollar (FRAX) — Asset Risk Assessment (Full)
Category: Stablecoin | Peg Mechanism: Hybrid (formerly fractional-algorithmic, now 100% CR via AMOs) | Issuer: Frax Finance
⚠ This report covers Legacy Frax Dollar (FRAX), NOT frxUSD. These are separate assets with separate balance sheets, separate backing, and separate contracts. frxUSD (
0xCAcd6fd266aF91b8AeD52aCCc382b4e165586E29) is Frax Finance’s current flagship stablecoin backed by tokenized Treasuries. Legacy FRAX (0x853d955acef822db058eb8505911ed77f175b99e) is the deprecated predecessor backed by USDC + AMOs. The 1:1 swap between them was closed in April 2025 (FIP-430).
Summary
FRAX is the original stablecoin from Frax Finance, launched December 2020 as the first fractional-algorithmic stablecoin. It moved to 100% collateral ratio in February 2023 (post-Terra). As of the North Star Upgrade (April 2025), FRAX has been officially designated “Legacy Frax Dollar” (L-FRAX) and superseded by frxUSD, which is backed by tokenized Treasuries (BlackRock BUIDL, Superstate USTB, WisdomTree WTGXX). The 1:1 migration path from FRAX to frxUSD has been closed per FIP-430 — the balance sheets are now separated. FRAX is effectively in wind-down mode with ~$153M circulating supply.
Peg mechanism: FRAX has no hard redemption mechanism. The peg is maintained by passive AMO liquidity positions in Curve/Convex pools — not by active market operations. The AMO Minter contract has been dormant since February 2023, and there is no evidence of active peg defense by the team. The ~$0.991 price reflects a passive equilibrium where existing LP positions absorb marginal trading, not a defended peg. See AMO Activity Status for evidence.
Contract (Ethereum): 0x853d955acef822db058eb8505911ed77f175b99e
Live data: Backing Monitor | Frax Facts L-FRAX Balance Sheet
Balance Sheet (as of March 29, 2026)
Data cross-referenced from Frax Facts L-FRAX and Backing Monitor.
Assets ($165.7M total)
| Category | Value | % of Total | Notes |
|---|---|---|---|
| Owned L-FRAX | $77.6M | 46.8% | Circular — protocol holds its own token |
| Owned L-FRAX/USD | $68.8M | 41.5% | Circular — FRAX in LP positions |
| Owned Volatile | $7.6M | 4.6% | Non-stablecoin assets (volatile) |
| Owned L-FRAX/Volatile | $6.7M | 4.0% | FRAX paired with volatile assets |
| Owned L-FRAX/FRAX-prev-FXS | $1.7M | 1.0% | FRAX/FXS LP positions |
| Owned Other | $1.7M | 1.0% | Miscellaneous |
| Owned USD | $372K | 0.2% | Actual USD stablecoins |
| Lent assets | $1.1M | 0.7% | Lent L-FRAX + USD |
Liabilities ($181.3M total)
| Category | Value |
|---|---|
| L-FRAX circulating supply | $152.2M |
| Borrowed USD stablecoins | $20.0M |
| FXB circulating supply (bonds) | $9.1M |
Key Ratios
| Metric | Value | Assessment |
|---|---|---|
| Headline CR | 91.4% | Under-collateralized — assets < liabilities |
| Balance (deficit) | -$15.7M | Net negative |
| External-only CR | 15.8% | Critically low — only $28.6M of $166M backing is non-FRAX |
| Circular backing | 73.8% ($122.3M) | Treasury FRAX/sFRAX/LFRAX — protocol holding its own token |
| Locked liquidity | $30.7M | Balance after locked liquidity: +$15.0M |
| On-chain CR (frozen) | 94.5% | Paused since Feb 22, 2026 — not being refreshed |
Four-Tier Asset Classification
The backing monitor classifies L-FRAX backing into tiers. Only “External” represents real, non-FRAX backing:
| Tier | Value | What It Means |
|---|---|---|
| Circular (Treasury) | $122.3M | Protocol holds its own FRAX/sFRAX/LFRAX — not real backing |
| Ecosystem | $14.3M | frxUSD/sfrxUSD/FPI — Frax ecosystem tokens, not independent |
| External | $28.6M | Real non-FRAX assets (USD, volatile, FRAX/USD LPs) |
| frxUSD-sys (excluded) | $165.2M | frxUSD system positions — excluded from L-FRAX balance sheet |
Key Risk Notes
- Under-collateralized at 91.4% CR, with -$15.7M deficit. The Feb 2023 vote to move to “100% CR” is no longer reflected in reality. The headline CR is below 100%, and the on-chain CR oracle has been frozen/paused since Feb 22, 2026 at a stale 94.5%.
- External-only CR is 15.8% — critically low. Of the $166M in “backing,” only $28.6M is non-FRAX external assets. The remaining 74% is the protocol holding its own token (circular) or ecosystem tokens (frxUSD, FPI). This is not real backing.
- $20M in borrowed USD stablecoins as a liability. The protocol has borrowed against the legacy balance sheet.
- $9.7M in FXB bond liabilities — outstanding Frax Bonds that mature to 1 Legacy FRAX each.
- Wind-down asset with no migration path. The 1:1 FRAX→frxUSD swap was ended in April 2025 (FIP-430). Legacy holders are stranded on a deprecated, under-collateralized balance sheet.
- Liquidity is critically thin. The primary Curve frxUSD/FRAX pool holds only $4.2M total ($3.9M frxUSD, $260K FRAX). This is the main exit route.
- No active peg defense. The AMO Minter contract has been dormant since February 2023 (3+ years). The ~$0.991 peg is maintained entirely by passive LP inertia from legacy Curve/Convex positions, not by active market operations. Zero governance proposals since mid-2025 address legacy FRAX peg management. If a large exit or Compound liquidation occurs, there is nobody at the controls to respond.
- On-chain CR oracle is frozen. The protocol stopped refreshing the on-chain collateral ratio on Feb 22, 2026 — silently, with no governance proposal or public explanation. The stale value (94.5%) overstates the actual CR (91.3%) by 3.2 percentage points. Any on-chain integrator reading this oracle is consuming misleading data.
- S&P rated 5/5 (Weak) in December 2023 — worst among eight assessed stablecoins. The under-collateralization concerns S&P flagged have since been confirmed by the balance sheet data.
- Naming confusion. The ticker “FRAX” now also refers to the rebranded FXS ecosystem/governance token (gas token for Fraxtal L2).
Peg Performance
Current Peg (Feb 4 – Mar 29, 2026, hourly data from PegTracker)
FRAX trades structurally below peg at ~$0.991, reflecting the undercollateralization:
| Metric | Value |
|---|---|
| Average price | $0.9914 |
| Average deviation | -0.86% below peg |
| Worst depeg | $0.9759 (-2.41%) |
| Best price | $1.0090 |
| Time below $0.995 | 95.8% |
| Time below $0.990 | 22.2% |
| Time below $0.980 | 0.2% (2 readings) |
For comparison: USDC deviates <0.05%, crvUSD averages $0.9997. FRAX’s persistent -0.86% discount is an order of magnitude worse.
Weekly Trend
| Week | Avg Price | Min Price |
|---|---|---|
| W05 (Feb 3) | $0.9916 | $0.9759 |
| W06 (Feb 10) | $0.9913 | $0.9875 |
| W07 (Feb 17) | $0.9911 | $0.9779 |
| W08 (Feb 24) | $0.9909 | $0.9822 |
| W09 (Mar 3) | $0.9903 | $0.9830 |
| W10 (Mar 10) | $0.9926 | $0.9896 |
| W11 (Mar 17) | $0.9924 | $0.9899 |
| W12 (Mar 24) | $0.9915 | $0.9884 |
No recovery trend. The price has been flat at $0.990–$0.993 for 8 consecutive weeks. The market is pricing in the structural deficit — this is not a temporary depeg but a stable discount reflecting the 91.4% CR.
Historical Events
| Event | Date | Impact |
|---|---|---|
| Launch (fractional-algo) | Dec 2020 | Initial CR ~85%, algorithmically adjusted |
| Terra/UST collapse | May 2022 | Peg pressure, survived intact |
| Vote to 100% CR | Feb 2023 | Removed algorithmic component entirely |
| SVB / USDC depeg | Mar 2023 | FRAX depegged to ~$0.87 (USDC contagion) |
| Multichain bridge exploit | Jul 2023 | Affected FRAX on non-Ethereum chains |
| North Star Upgrade (frxUSD launch) | Apr 2025 | FRAX designated “legacy”, migration path closed |
Supply Breakdown
| Component | Amount |
|---|---|
| FRAX + LFRAX supply (CSV) | 190,963,373 |
| + sFRAX supply (on-chain) | 56,471,746 |
| + sfrxUSD supply (on-chain) | 22,481,978 |
| - Protocol-held | -115,498,139 |
| Net circulating | 154,418,958 |
Note: sfrxUSD supply is included because legacy FRAX backs some sfrxUSD positions. Protocol-held deduction removes FRAX the protocol owns in its own treasury.
Curve frxUSD/FRAX Pool (AMO Peg Health)
| Metric | Value |
|---|---|
| frxUSD balance | $3.9M |
| FRAX balance | $259.7K |
| FRAX % of pool | 6.3% |
| Pool health | Balanced |
FRAX is 6.3% of the pool (slight premium to frxUSD), but total pool depth is only $4.2M. This is the primary market exit route for legacy FRAX holders. A $1M+ sell would move the pool significantly.
AMO Architecture (KEY RISK)
What Are AMOs?
Algorithmic Market Operations (AMOs) are smart contracts authorized to mint FRAX and deploy it into DeFi strategies. They operate within governance-approved caps and are coordinated through the central AMO Minter (0xcf37B62109b537fa0Cb9A90Af4CA72f6fb85E241). The comptroller multisig (0xB1748C79709f4Ba2Dd82834B8c82D4a505003f27) executes most operations.
AMO Status
| AMO | Contract | Status | Capital | Risk Notes |
|---|---|---|---|---|
| Curve/Convex (via comptroller) | 0xB174... | Active — largest position | $49.3M FRAX in Convex FRAX/USDe, $3.8M in Curve frxUSD/FRAX, plus smaller LPs | Deprecated as standalone contract; operations run through comptroller multisig. Bulk of the L-FRAX/USD balance sheet category ($68.8M). |
| Compound AMO | 0xB174... | Active | $37.4M sFRAX supplied as collateral; $20M USDT borrowed | Source of the $20M borrowed USD liability. Leveraging an under-collateralized balance sheet. |
| Fraxlend AMO V1 | 0x0Ed8... | Active | Small — FPI lending | Ethereum only |
| Fraxlend AMO V3 | 0xf6E6... (Eth) 0xCDeE... (Arb) 0x58C4... (Fraxtal) | Active | ~$1.1M lent across Fraxlend pairs (MKR, UNI, frxETH, FXB, FPI, sfrxETH, WBTC, ezETH) | Multi-chain deployment |
| Aave AMO V3 | 0x0F2a... | Active | FRAX supplied to Aave V3 + V3 EtherFi; small idle USDC | FIP-378 authorized 100M FRAX minting cap (Jul 2024). Small actual deployment. |
| Uniswap V3 AMO V2 | 0xc91B... | Active | Several LP positions: FRAX/USDC, FPI/FRAX, stkAAVE/FRAX, frxETH/FRAX | Concentrated liquidity positions |
| FXB AMO | Fraxtal 0xfC9f..., 0xE6ed... | Active | $9.1M in outstanding bonds across maturities (2025–2055) | Bonds mature to 1 L-FRAX each. Includes FXB20261231, FXB20271231, FXB20291231, FXB20551231. |
| Borrow AMO | (FIP-415) | Active | $50M authorized cap (Dec 2024) | Can mint FRAX and/or use treasury to borrow stablecoins. Likely contributes to the borrowed USD position. |
| Fraxswap TWAMM | Various | Active | Small positions across chains (Eth, Fraxtal, Avalanche, BSC, Polygon, Optimism) | Time-weighted AMM orders for collateral operations |
| FraxFerry | Multiple bridges | Active | FRAX locked in bridge contracts across ~10 chains | Cross-chain bridge infrastructure. $1.3M FRAX in ethereum→moonriver ferry alone. |
Critical AMO Risk Factors
1. AMO minting is NOT disabled.
No FIP has formally frozen legacy FRAX minting at the contract level. The AMO Minter contract has no pause function — minting can only be blocked by:
- Setting mint caps to zero
- Removing AMOs from the authorized list
- Setting the minimum CR threshold impossibly high
None of these actions have been taken. The FIP-378 (Aave AMO, Jul 2024) authorized a 100M FRAX minting cap and it has not been rescinded. In theory, the multisig could mint additional legacy FRAX at any time.
2. Active borrowing against a deficit balance sheet.
The Compound AMO has $37.4M sFRAX supplied as collateral and $20M USDT borrowed against it. This is the source of the Borrowed USD stablecoins: $19,992,616 liability on the balance sheet. Borrowing against an already under-collateralized balance sheet (91.4% CR) increases risk for legacy holders. If sFRAX collateral value drops or the USDT loan is called, the deficit worsens.
3. No formal wind-down plan.
There is no published roadmap for unwinding legacy AMO positions. The only wind-down governance action is FIP-442 (Feb 2026, passed), which allows early exit from a specific locked Convex vault at a 4% fee. The $77.2M in LP positions and $37.4M in Compound have no announced exit strategy.
4. Zombie governance.
All new AMO governance proposals since mid-2025 are exclusively frxUSD/sfrxUSD:
- FIP-434 (Sep 2025): sfrxUSD AMO strategies
- FIP-437 (Oct 2025): Predeposit Vault AMO (frxUSD)
- FIP-439 (Nov 2025): sfrxUSD new strategies
- FIP-4XX (Mar 2026, in discussion): Aave V4 + Morpho for sfrxUSD
Legacy FRAX is not being dismantled — it is being ignored.
5. Concentrated multisig control.
The comptroller multisig (0xB174...) controls the majority of AMO-deployed capital. It holds the largest Convex positions, executes the Compound AMO, and manages directly-held tokens. Legacy FRAX holders have no practical governance recourse — veFXS governance is focused on frxUSD.
Top AMO Positions (from Frax Facts API, March 29 2026)
| Position | Value | Location |
|---|---|---|
| FRAX staked in Convex FRAX/USDe | $49.3M | Ethereum comptroller |
| sFRAX collateral (Compound AMO) | $37.4M | Ethereum comptroller |
| FRAX held directly | $17.5M | Ethereum comptroller |
| USDe staked in Convex FRAX/USDe | $16.4M | Ethereum comptroller |
| sfrxUSD held directly | $5.0M | Fraxtal treasury |
| FRAX in Curve frxUSD/FRAX LP | $3.8M | Ethereum comptroller |
| CVX locked in vlCVX | $2.0M | Ethereum comptroller |
| LFRAX held directly | $1.9M | Fraxtal treasury |
Frax Bonds (FXBs)
Mechanism
FXBs are zero-coupon bond ERC20 tokens that redeem 1:1 for Legacy FRAX (not frxUSD) at maturity. They are sold at a discount via a continuous Gradual Dutch Auction (GDA) — the discount is the buyer’s yield. The L-FRAX collateral is locked inside the FXB contract itself, making redemption trustless: holders call burn() after maturity to receive L-FRAX.
Key contracts:
- FXB AMO (Fraxtal):
0xE6ed07952dC9993DD52c6d991Fa809C00eBE58a3 - FXB Factory (Ethereum):
0x7a07D606c87b7251c2953A30Fa445d8c5F856C7A - FXB Factory (Fraxtal):
0xaFa1705021f65418e746D8664f4B8A58271f6De4 - Auction Factory (Fraxtal, permissionless):
0x2606C2BbE377EDa9e38FFf300D422Ca7cCAB1e5d
Outstanding FXBs
| FXB | Chain | Total Supply | Protocol-held | External | Price (FRAX) | Ext Value | Maturity |
|---|---|---|---|---|---|---|---|
| FXB_20261231 | Ethereum | 6,046,781 | 1,999,230 | 4,047,551 | 0.9334 | $3.7M | Dec 31, 2026 |
| FXB20271231 | Fraxtal | 4,338,435 | 3,431,224 | 907,211 | 0.8252 | $0.7M | Dec 31, 2027 |
| FXB20291231 | Fraxtal | 12,652,837 | 8,144,985 | 4,507,852 | 0.7031 | $3.1M | Dec 31, 2029 |
| FXB20551231 | Fraxtal | 13,553,959 | 832,137 | 12,721,822 | 0.0870 | $1.1M | Dec 31, 2055 |
| Total | $9.0M |
Matured FXBs (FXB_20240630, FXB_20241231, FXB20251231) have ~$340K still unredeemed.
FXB as Farming Asset — Yield Analysis
FXBs can be used as a fixed-income strategy: buy at a discount, hold to maturity, redeem for 1 L-FRAX. The yield depends on how far L-FRAX depegs between now and maturity.
| FXB | Price | Days Left | FRAX Yield | APY (FRAX) | Break-even L-FRAX Price |
|---|---|---|---|---|---|
| FXB_20261231 | 0.9334 | 277 | 7.1% | 9.5% | $0.93 |
| FXB20271231 | 0.8252 | 642 | 21.2% | 11.6% | $0.83 |
| FXB20291231 | 0.7031 | 1,373 | 42.2% | 9.8% | $0.70 |
| FXB20551231 | 0.0870 | 10,869 | 1,049% | 8.6% | $0.09 |
Scenario analysis for FXB_20261231 (the shortest-dated active bond):
| L-FRAX at maturity | USD return | Assessment |
|---|---|---|
| $1.00 (full repeg) | +7.1% | Best case — 9.5% APY |
| $0.992 (current) | +6.3% | Status quo — 8.4% APY |
| $0.95 | +1.8% | Mild further depeg — still positive |
| $0.93 (break-even) | 0% | Break-even |
| $0.80 (severe depeg) | -14.3% | Loss — L-FRAX backing collapses |
FXB_20261231 assessment: At 0.9334 FRAX, you’re getting ~9.5% APY in FRAX terms for 9 months of maturity risk. The break-even is L-FRAX at $0.93 — a further 6% depeg from current $0.992. Given that L-FRAX has traded in a tight $0.976–$1.009 range for 8 weeks and the AMOs are still maintaining the peg (albeit at a discount), a 6% further depeg would require a significant catalyst (Compound AMO liquidation, major volatile asset crash, or protocol abandonment). The risk-reward is reasonable for the 2026 maturity — short enough that the wind-down risk is manageable and the yield compensates for the depeg risk.
Longer-dated FXBs are much riskier:
- FXB20291231 (3.75 years): L-FRAX must stay above $0.70 — plausible but a long time for a deprecated asset
- FXB20551231 (29 years): Essentially a bet that Frax Finance will still exist and maintain L-FRAX in 2055. At 8.6% APY this barely compensates for the existential risk. The break-even ($0.09) is generous, but collecting at maturity requires the protocol to function for three decades.
FXB Risk Factors
1. FXBs redeem into L-FRAX, not USD. The docs explicitly state FXBs “do not guarantee FRAX peg, FRAX value, or yield/interest denominated in any other asset except FRAX.” Your FXB is only as good as L-FRAX’s value at maturity.
2. Fraxtal FXBs have operational/counterparty risk. Post-FIP-430, Fraxtal FXBs are being upgraded from frxUSD-backed to L-FRAX-backed (new contract: FXB_LFRAX.sol v1.2.0). After the upgrade, the team must manually transfer L-FRAX to each FXB contract before maturity. If they fail to fund it, burn() reverts with InsufficientCollateral.
3. Secondary market liquidity is terrible. FIP-379 discussion revealed ~$671K liquidity in Curve FXB pools with 800 bps slippage. Pre-maturity exit is costly.
4. FXBs add to L-FRAX liabilities. The $9.0M in externally-held FXBs represents future L-FRAX obligations on an already under-collateralized balance sheet.
5. Quit Creditor positions. FXB20291231 and FXB20271231 have large protocol-held quantities in “L1 Quit Creditor Receiver” contracts (for UniV3 FRAX/DAI and FRAX/USDC). These are from FIP-379’s locked liquidity exit mechanism — LP holders who exited locked positions received FXBs at auction price.
6. Timelock can redeem early. The isRedeemable() function allows the factory timelock to call burn() before maturity — an admin privilege.
FXB Governance
| FIP | Date | Description |
|---|---|---|
| FIP-355/356/357 | Apr–May 2024 | Launched FXB20251231, FXB20291231, FXB20551231 (30M cap each) + Fraxlend pairs |
| FIP-379 | Jul 2024 | Locked Liquidity Standard Exit — LPs exit locked positions into FXB2029 at auction price |
| FIP-384 | Jul 2024 | Launched FXB20271231 (30M cap) + Fraxlend pair |
| FIP-430 | Apr 2025 | Balance sheet separation — FXBs must redeem L-FRAX, not frxUSD. Fraxtal FXBs being upgraded. |
AMO Audit History
| Audit | Firm | Date | Scope |
|---|---|---|---|
| Initial protocol | CertiK | Oct–Nov 2020 | Found 39 issues (3 critical, 8 major). Addressed. |
| BAMM contracts | ChainSecurity | — | Borrow AMM component |
No comprehensive recent audit of AMO contracts or the legacy balance sheet has been publicly disclosed. The initial CertiK audit predates most current AMO deployments.
AMO Activity Status (KEY FINDING)
Evidence: No Active Peg Defense
Investigation of on-chain data (March 29, 2026) reveals that no entity is actively managing the legacy FRAX peg. The ~$0.991 price is sustained entirely by passive liquidity from old AMO positions, not by active market operations.
| Evidence | Detail | Source |
|---|---|---|
| AMO Minter dormant | Last transaction: February 9, 2023 — over 3 years ago. No new FRAX has been minted through the AMO system since then. Last operations were syncDollarBalances calls; last mintFraxForAMO dates to mid-2022. | Etherscan |
| Comptroller active but opaque | Multisig (0xB174...) last tx March 27, 2026. Regular execTransaction calls through Jan–Mar 2026. However, this multisig controls both legacy FRAX and frxUSD positions — activity does not prove legacy peg defense. | Etherscan |
| Zero governance proposals for peg defense | Every AMO-related proposal since mid-2025 is exclusively frxUSD/sfrxUSD (FIP-434, 437, 439, 443). Legacy FRAX governance is limited to exit/unlock proposals for trapped users (FIP-442). No proposal proposes injecting collateral, rebalancing positions, or defending the peg. | Frax Governance Forum |
| CR slowly drifting | 91.06% → 90.86% → 91.34% with fluctuation over recent weeks. Consistent with passive positions drifting, not active management. | Backing Monitor |
| Persistent discount, not defended par | FRAX trades at $0.991 avg (below $0.995 for 95.8% of readings over 8 weeks). An actively managed peg would target closer to $1.00. | PegTracker data |
How the Passive Peg Works
The peg holds at ~$0.991 through inertia from legacy LP positions:
- Curve/Convex FRAX/USDe position ($49.3M) — deployed historically, auto-compounding rewards. Creates a large liquidity wall but is not being rebalanced.
- Curve frxUSD/FRAX pool ($3.8M FRAX side) — the primary price-setting venue. FRAX is only 6.3% of the pool, meaning most FRAX has been drained to the buy side, which pushes price toward peg.
- Comptroller FRAX holdings ($17.5M) — could theoretically be deployed to defend the peg, but no evidence this is happening.
The peg does not require 100% redeemability or active management — it only needs enough passive liquidity to absorb marginal selling. Since only a small fraction of the $153M circulating supply trades at any given time, the existing LP positions absorb that flow. The market prices the 91% CR as a stable ~0.9% discount rather than a 9% discount.
Why This Is Fragile
- No active responder. If a large holder exits ($5M+), or if the Compound position ($37.4M sFRAX collateral, $20M borrowed USDT) faces liquidation pressure, there is nobody at the controls to rebalance.
- LP positions can be withdrawn. The comptroller multisig could withdraw legacy LP positions at any time for frxUSD purposes. There is no governance lock preventing this.
- Incentives are declining. Curve/Convex rewards for FRAX pools are being redirected to frxUSD. As rewards decline, third-party LPs exit, reducing depth further.
- FIP-442 enables exits. The recent proposal allowing early exit from locked Convex FRAX vaults (at 4% fee) will reduce LP depth as locked participants leave.
On-Chain CR Oracle Freeze
The on-chain collateral ratio oracle stopped refreshing on approximately February 22, 2026 with no public explanation.
| Metric | Value |
|---|---|
| Stale on-chain CR | 94.5% |
| Live computed CR | 91.3% |
| Discrepancy | 3.2 percentage points |
| Days since last refresh | ~35 days (as of March 29, 2026) |
No governance proposal, forum post, or public communication explains the freeze. It happened silently. The timing roughly corresponds to a gap in comptroller multisig activity in late February.
Impact: Any on-chain protocol reading the Frax CR oracle for risk parameters (collateral factors, liquidation thresholds) is consuming a stale value that overstates collateralization by 3.2%. This is a systemic risk for integrators.
Scoring Rationale
| Category | Score | Notes |
|---|---|---|
| Peg Mechanism | 4.0 | No active peg defense — AMO Minter dormant since Feb 2023, zero governance proposals for peg management. Peg holds at ~$0.991 purely via passive LP inertia from legacy Curve/Convex positions. Trades below $0.995 for 95.8% of readings. On-chain CR oracle frozen since Feb 22, 2026 (stale 94.5% vs actual 91.3%). Fragile: no responder if a large exit or liquidation occurs. |
| Backing | 2.0 | Under-collateralized at 91.4% CR with -$15.7M deficit. External-only CR is 15.8% — 74% of backing is circular (protocol holding its own token). $20M borrowed USD and $9.1M FXB bonds as additional liabilities. Far worse than “nominally 100% CR.” |
| Liquidity | 3.0 | Primary Curve pool is only $4.2M. Still functional for small exits, but a $153M stablecoin with $4.2M of DEX liquidity is a serious mismatch. Liquidity will continue declining as incentives go to frxUSD. |
| Issuer | 5.0 | Frax Finance is an established DeFi team (Sam Kazemian, 5+ years). Active development on frxUSD, Fraxtal L2, frxETH. However, attention has shifted entirely away from legacy FRAX — the frozen on-chain CR oracle confirms deprioritization. |
| Overall | 2.5 | Very high risk — under-collateralized, mostly circular backing, thin liquidity, frozen monitoring, and no migration path. Not suitable for any position. Existing holders should exit. |
Comparison
| Factor | FRAX (legacy) | frxUSD (successor) | crvUSD | USDC |
|---|---|---|---|---|
| Status | Wind-down | Active flagship | Active | Active |
| Circulating | ~$153M | ~$125M | ~$264M | $40B+ |
| CR | 91.4% (below 100%) | ~100% (Treasury-backed) | ~140% inclusive | 100%+ (attested) |
| External-only CR | 15.8% | ~100% | Varies | 100%+ |
| Backing | 72% circular + USDC + AMOs | Tokenized Treasuries (BUIDL, USTB) | CDP + YB + PK | USD reserves (attested) |
| Primary DEX depth | $4.2M (Curve) | Growing | Deep (Curve native) | Deep |
| Reserves audit | None, CR oracle frozen | Fiat-redeemable, named custodians | None (on-chain verifiable) | Monthly attestations |
| Score | 2.5 | Not yet assessed | 5.0 | 9.0 |
Recommendations
- Do not take new positions in legacy FRAX. Use frxUSD for Frax ecosystem stablecoin exposure.
- Existing holders should exit. The primary Curve pool is only $4.2M — exit in small tranches to avoid slippage. The pool is already below the $5M threshold where exit risk is material.
- Watch for governance proposals affecting legacy FRAX redemption, backing changes, or further balance sheet separation.
- If holding FRAX in protocols: Verify the protocol distinguishes between FRAX and frxUSD in risk parameters and oracles. Alert risk teams that the on-chain CR oracle is frozen (stale 94.5% vs actual 91.3%) and has not been refreshed since Feb 22, 2026.
- Monitor the deficit trajectory — the -$15.7M deficit and 91.4% CR could worsen if volatile assets ($8.3M, 25.7% of external backing) decline.
- Watch for AMO position withdrawals. The comptroller multisig could withdraw legacy LP positions (currently providing passive peg support) at any time. No governance lock prevents reallocation to frxUSD. Track the Curve frxUSD/FRAX pool balance and Convex FRAX/USDe position for sudden declines.
Data Sources
- Live dashboards: Backing Monitor (L-FRAX) | Frax Facts L-FRAX Balance Sheet
- Frax Facts API:
https://api.frax.finance/v2/lfrax/balance-sheet/latest— returns all 202 asset positions + 50 liabilities with current values, updated hourly - On-chain contracts: FRAX token (
0x853d...), AMO Minter (0xcf37...), Comptroller multisig (0xB174...), Curve frxUSD/FRAX pool (0xBBaf...) - CoinMarketCap — Legacy Frax Dollar
- DefiLlama — Frax USD
- Frax Finance Docs
- Frax Governance Forum — FIP-378, FIP-415, FIP-430, FIP-442
- S&P Global — FRAX Stability Assessment (Dec 2023)
- CertiK — FRAX Audit (Oct 2020)
Bottom Line
Legacy FRAX is worse than deprecated — it is under-collateralized. The balance sheet shows a -$15.7M deficit, 91.4% CR, and only 15.8% external-only CR (74% of “backing” is the protocol holding its own token). The on-chain CR oracle has been frozen since February 2026. Primary DEX liquidity is down to $4.2M for a $153M stablecoin. Frax Finance has moved on to frxUSD with Treasury-backed reserves, fiat redeemability, and active development. The 2.5/10 score reflects an under-collateralized, illiquid, deprecated stablecoin with circular backing and no exit plan for legacy holders.