Frax Finance Founder Sam Kazemian Questions Ethereum’s Dominance in Stablecoin and RWA Issuance
Frax Finance founder Sam Kazemian recently questioned Ethereum’s dominance in the issuance of stablecoins and real-world asset tokenization (RWA) on the X platform. He pointed out that when assets are natively issued across chains, Ethereum’s “settlement assurance” loses significance, and he urged the community to acknowledge the challenges posed by institutional adoption and real-world implications.
Loss of Dominance in Stablecoins and RWA: Is Ethereum’s Settlement Assurance Necessary?
Kazemian stated that as RWAs and regulated stablecoins rapidly rise, the importance of issuing or settling assets on the Ethereum mainnet (ETH L1) is diminishing.
1/ With RWAs & regulated stablecoins one of the fastest growing sectors in crypto, does it actually matter if a stablecoin/RWA is issued or settled on Ethereum? I don’t think it does once the asset is issued natively anywhere else but on ETH L1. Let me explain why — sam.frax (@samkazemian) March 29, 2025
He cited the example of the tokenized U.S. Treasury fund BUIDL launched by BlackRock and Securitize, which has been issued on Ethereum, Arbitrum, and Solana simultaneously, indicating that multi-chain deployment of RWA has become the new norm. He remarked, “This is certainly a good thing for BlackRock, but for the vision of Ethereum as the ‘institutional issuance main chain,’ it might be a zero-sum game.” He further pointed out that for assets without issuers (like BTC), Ethereum’s settlement assurance still holds value; however, for RWAs with responsible entities, the key to fulfilling obligations lies with the issuer, not the blockchain’s verification mechanism. The necessity of choosing Ethereum thus varies from case to case.
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Is Institutional Trust in Ethereum a Myth? Kazemian Points to Systemic Flaws
Kazemian noted that if tokenized assets are natively issued directly on L2 rather than being derived from the Ethereum mainnet, these assets would lose Ethereum’s security and trust endorsement, making the network’s necessity significantly less important. He cited Frax’s institutional stablecoin $frxUSD as an example, which exists natively on chains like Fraxtal and Solana without relying on Ethereum’s mainnet for protection. He criticized the current community’s overly diffuse attitude towards trust in Ethereum:
“Ethereum supporters should have a strong territorial consciousness towards the issuance of RWAs, similar to Bitcoin maximalists’ attitude towards BTC. Otherwise, Ethereum’s ‘settlement assurance’ feature will ultimately become hollow in the realm of RWA. If RWAs are natively issued across multiple chains, then it doesn’t matter where they are settled.”
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Possible Solutions? Asset Priority and Uniqueness Attempt to Rebuild Mainnet Value
As a solution, Kazemian proposed the concept of “issuance alignment.” He suggested establishing legally prioritized “senior class liabilities” on the Ethereum mainnet, allowing only issuance and priority redemption on the mainnet, while daily trading assets could retain cross-chain flexibility. He hopes this can restore Ethereum’s dominance in the legal and trust levels:
“If we want to strengthen Ethereum’s position in institutional asset issuance, we should ensure that the most important, legally prioritized repayment assets can only be issued on the Ethereum mainnet.”
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Can Ethereum Remain the Institutional Main Chain? Community Consensus and Technological Innovation Needed
Sam Kazemian’s questioning reveals potential structural risks for Ethereum in the new financial era. As issuers become the main entities for cross-chain asset fulfillment, Ethereum risks losing its long-term competitive advantage if it does not clearly define its role. Currently, “senior class liabilities” may be the starting point for rebuilding its uniqueness, but whether it can balance multi-chain flexibility with mainnet authenticity still depends on the collective efforts and experiments of the broader community.
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