S&P Global Ratings assesses the ability of FRAX to maintain its peg to the U.S. dollar at 5 (weak). Our asset assessment of 5 (weak) reflects current undercollateralization and incorporates uncertainty about the future composition of assets when collateralization exceeds 100%. FRAX is primarily backed by collateral on the blockchain (on-chain) using smart contract protocols that balance the amount of FRAX versus other assets to maintain its 1 to 1 peg. The assets include various cryptocurrencies, including stablecoins. FRAX Finance also holds a small portion of cash/cash equivalents with a public benefit corporation, FinResPBC. We also see FRAX as having significant dependencies on smart contracts and oracles. These are necessary to execute various protocols including, trades and loans, and oracles connect information to these protocols. Some of these are new with v3 and have yet to be substantially tested. We believe this is commensurate with an assessment of 5 (weak).