Polygon Labs, Frax, Curve Finance and DFB Network have launched a series of currency liquidity pools on the Polygon blockchain, enabling onchain swaps between fiat-pegged stablecoins using Frax’s frxUSD as the base dollar peg.
The pools are live on the Polygon implementation of Curve and pairs frxUSD against BRZ (Brazilian Real), IDRX (Indonesian Rupiah), tGBP (British Pound), AUDF (Australian Dollar), KRWQ (Korean Won) and USDT, with additional currency pairs in development. The four partners have also collaborated on an incentive program to increase liquidity in the pools, with indicators for reward distribution.
$6 trillion market
The launch targets the $6.6 trillion-a-day global foreign exchange market, which the partners say has remained expensive and sluggish due to its concentration among a small number of intermediaries. Onchain FX has been theoretically possible for years, the partners say, but high transaction fees, fragmented liquidity on the dollar side and a lack of institutional trust in automated market maker (AMM) infrastructure have prevented adoption at commercial scale.
“When you pair sub-cent transaction fees with a stable dollar base like frxUSD and Curve’s liquidity infrastructure, you get something the traditional FX market has never offered: transparent pricing, instant settlement, and access for every business,” said Marc Boiron, CEO of Polygon Labs in a blog post.
How the stack works
Each layer of the stack has a different function. Frax’s frxUSD acts as the dollar anchor for each pool. The stablecoin is fully backed by tokenized US Treasuries from institutions such as BlackRock, WisdomTree and Superstate, and the protocol passes underlying government bond yields as sustainable LP incentives.
Curve offers the exchange layer through the FXSwap pool type, which is optimized for currency pairs trading and offers tighter spreads and less slippage than general AMMs. Curve has been active on Polygon since 2021 and remains one of the deepest stablecoin liquidity venues in DeFi.
DFB Network provides the market making and liquidity infrastructure and connects international stablecoin issuers to the onchain exchange layer. The company provides automated bots that monitor on- and off-chain FX markets and perform arbitrage to maintain the health of the pool.
Polygon itself acts as a settlement layer. A typical token transfer on the network costs about $0.002, according to Polygon Labs, and the throughput capacity is more than 2,600 transactions per second.
Commercial currency
The pools are used as a practical infrastructure for cross-border business payments. For example, a company that settles transactions between Brazil and the United States could exchange BRZ for frxUSD at market rates, settle in seconds and pay a fraction of a cent in fees, the blog post said.
For a company processing $10 million per month, even a 50 basis point improvement in currency spreads would generate $50,000 per month.
Among the non-USD stablecoins in the initial set, BRZ is described as the longest-lived Brazilian real stablecoin, IDRX serves a large retail base in Indonesia, tGBP is positioned as the leading British Pound-pegged token, and AUDF is backed by one of the largest OTC desks in the Oceania region.
This article was written using AI workflows. All of our stories are curated, edited, and fact-checked by a human.