Frax Votes to Approve frxUSD Backed by BlackRock’s BUIDL
In a unanimous vote, Frax decided on a six-day ballot that the FIP-418 proposal, which will include BlackRock Institutional Digital Liquidity Fund – also known as BUIDL – as collateral for the newly issued frxUSD stablecoin.
Collaboration With BlackRock
BlackRock, Inc., the world’s largest asset manager with more than $10.4 trillion in assets under management, offers the BUIDL fund as a secure, US dollar-denominated liquidity pool. With $648 million in assets under management, BUIDL presents an opportunity for the holders of stablecoins to derive yield without specific counterparty risks. In light of the above, the founder of Frax Finance, Sam Kazemian, said:
frxUSD brings together the transparency and programmability of blockchain technology with the trust and stability of BlackRock’s prime treasury offerings.”
This move is in line with Frax’s mission of delivering innovative yield-generating products while leveraging the reliability of traditional financial instruments.
BUIDL’s Growing Role in DeFi
The idea to integrate BUIDL into frxUSD came from Securitize, a brokerage firm which manages the BUIDL fund. A proposal from Dec. 22 explains how frxUSD will be pegged 1:1 to the US dollar, backed by US government securities by means of BUIDL.
Use cases of BUIDL in DeFi are nothing new. For example, Ethena Labs has already created USDtb, a stablecoin collateralized by BUIDL, whose market capitalization is already $70 million. Similarly, Curve Finance went on to list DEUSD in November 2024, enabling users to mint the yield-bearing stablecoin against BUIDL as collateral.
Increasing Yield-Bearing Assets Demand
While DeFi is maturing, investors are abandoning traditional stablecoins in favor of yield-bearing assets. Industry leaders are of the opinion that newer technologies, such as artificial intelligence and account abstraction, will make yield-accrual mechanisms even easier in the future and such assets even more appealing.
WeFi co-founder Reeve Collins said of the trend:
“Yield-bearing stable assets will dominate the market because they offer superior financial benefits compared to traditional stablecoins”.
Bridging Traditional and Decentralized Finance
This shows the fast-moving worlds of both traditional and decentralized finance coming closer together with the community deciding on BUIDL-backed frxUSD. With this, Frax will be combining the best aspects of both worlds, hence creating one of a few stablecoin models in the market which focuses on transparency, stability, and finally financial rewards-innovative for DeFi.
In the process of adopting BUIDL, Frax positions itself for a new era of stablecoins and allows continued sustainable growth both for its ecosystem and users.
