Lack of funds shuts down Stellar-based crypto bank FairX

FairX announced this Saturday and they are terminating operation due to lack of funds. The company was planning to leverage the Stellar network and build a banking platform that could take both Stellar and fiat and convert them into any other digital token. 

Michael Dowling, FairX founder, explained through a series of tweets that the company has been struggling for the last 14 months.

“Let me start right off the bat by telling you our original goals of creating a licensed national bank is unfortunately failing. The immediate reason is simply a lack of funding - for the past 14 months we’ve been on a tear trying to raise money.”

Regarding the plan of the company, he tweeted:

“Ultimately, our business model was simple: introduce a new, licensed, fully regulated national bank, modeled as a financial market utility, that would work with individuals and banks to create a dematerialized bank deposit, denominated in USD. The bank was Frank Financial.”

Dowling said that the company wasn’t receiving any attention from venture capitals or crypto-focused investors. While some other investors were interested, the company couldn’t issue shares due to banking regulations.

Dowling also shared his skepticism of fiat-pegged stablecoins:

“This dematerialized bank deposit would act, in many respects, similarly to a stable coin, except a stable coin this was not. A stable coin, by its definition, is not an asset that can settle transactions between banks in the context of, say, ACH or CC transactions. 

A bank deposit, however, is. Stablecoins are doomed for failure for a couple reasons - but the main reason is because the bank deposit a stable coin points to is not owned (legally) by the token holder - its owned by the stable coin issuer.”