Well, if you can't predict how the rates will be in the future AND you can't predict how long your offers will be used, using the only available variable rate is not a bad move imho.
A different suggestion would be to make FRR ONLY available for 30 day offers. Then rate discovery could happen with shorter timeframe loans while FRR would still not have to be capped.
I do not have a solution to fixing the FRR wall, but I know the wall is bad for active lenders. In my opinion the FRR should never have existed and should be removed until a better way is found. Personally, I don't think a better way exists that not favour either the active or passive lender over one another or favour the lenders or traders over each other.
What did you think about my suggested combination of "smaller interest if position = negative + larger share of profit if position is positive" a few posts back?