A former Trump campaign advisor and unsuccessful Federal Reserve nominee is set to launch a new stablecoin backed by a pricing model that has already failed once because of regulatory concerns.

Economist Stephen Moore, who withdrew his nomination to the Federal Reserve this year, and partner Sam Kazemian, founder of the Wikipedia competitor Everipedia, are set to unveil Frax, a stablecoin pegged to the U.S. dollar. Former Reagan deputy general counsel, Ralph Benko, will serve as Frax’s general counsel

Instead of the typical stablecoin backing of a one-to-one pool of reserve dollars, Frax will rely on a fractional reserve: Blockchain-recorded algorithms to lend the company’s reserves and collect interest. The idea is that the interest from these loans will insure that Frax’s value remains stable to the dollar.

Fractional reserve stablecoins, however, have a checkered history. Last year, Basis, a project backed by venture capital firm Andreesson Horowitz and GV, the venture capital arm of Alphabet, raised $135 million to launch a fractional reserve stablecoin. Basis was to be supported by a series of bond sales to keep the stablecoin’s value steady. However, regulators were not thrilled with the structure of the digital currency, and Basis collapsed, leading to the company refunding the majority of investors.

  • Kazemian told Fortune that Frax’s Blockchain-supported loan structure will insure its success. But this concept is unproven in the digital currency market. The use of bond sales proved to be the undoing of Basis, as the creators found they would be forced to label them as unregistered securities, hampering liquidity and triggering fees.
  • Moore, a self-described libertarian, is bearish on the future of stablecoins. He told Fortune that the government monopoly on currency is “unhealthy for markets.” He supports private competitors challenging  central banks over the money supply.
  • Facebook’s attempt to disrupt central banks with its Libra stablecoin has met with increased resistance and doubt. As the project endures increasing regulatory scrutiny from around the world, major backers Mastercard and Visa have jumped ship, joining the list of companies like Stripe, PayPal and eBay that have abandoned the proposed cryptocurrency. 
  • Facebook CEO Mark Zuckerberg is scheduled to testify about Libra before the House Financial Services Committee on Oct. 23.