Frax Finance‘s community is reviewing a proposal to allocate up to $15 million to World Liberty Financial (WLFI), a decentralized finance project associated with US President Donald Trump’s family.
A $5 million initial investment would be made to purchase WLFI tokens, and to establish a partner. The success of the initial investment will determine whether or not a further $10 million can be invested.
Proponents believe this move could position Frax Finance within WLFI’s ecosystem, leveraging Trump’s involvement and pro-crypto stance.
According to the proposal, WLFI can introduce millions of Americans into decentralized finance. Frax Finance hopes to gain a stronger foothold on the US crypto scene by aligning itself with WLFI.
WLFI invested more than $70 millions in DeFi major projects, including Aave Chainlink Ethereum Tron Ethena.
WLFI’s governance model allows token holders to influence critical decisions, and its partnerships with Chainlink and Ethena Labs are key advantages.
As a further strategic advantage, the connection between Frax’s co-founder Stephen Moore and WLFI, a former Trump advisor on economics, is highlighted.
The proposal is:
“By partnering with WLFI, FRAX would solidify its status as a premier US-origin stablecoin while benefiting from WLFI’s ecosystem and governance opportunities.”
Pushback by the community
Community members have resisted the idea despite these benefits. Critics are concerned about the risks involved and wonder if Frax Finance is able to afford such an important commitment.
A community member said:
“Investing $5 million at a $5 billion fully diluted valuation in a project without a proven track record is extremely risky and unreasonable. Such a high FDV relative to the current market capitalization suggests significant potential for future dilution, which could negatively impact token value. This valuation level is reminiscent of the exuberant and unsustainable valuations seen during the 2021-2022 crypto bull market.”
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