Frax Finance Votes on BlackRock’s BUIDL as Backing Asset
Frax Finance has opened a critical vote to add BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) as the collateral for its planned stablecoin, Frax USD (frxUSD).
Voting started on Dec. 27 and will be open until Jan. 1, 2025. Initial results indicate strong support among Frax tokenholders (FXS), with no opposition to the proposal aired in discussion threads yet.
This proposal represents a larger trend of integrating more traditional financial instruments into the realm of DeFi, as the space continues to look for ways to increase its stability and yield opportunities.
Key Benefits of BUIDL Integration
The addition of BlackRock’s BUIDL as a reserve asset presents several benefits to Frax USD:
- Institutional Yields: BUIDL delivers stable, institutional-grade returns through daily accrued dividends.
- Improved Liquidity: Greater liquidity options pave the way for smoother transactions for users.
- Risk Reduction: Collateralized by US government securities, the counterparty risk is minimized.
- Onchain Utility: Tokenized RWAs bridge traditional and decentralized finance seamlessly.
According to community discussions, such as a post by user “achaffee”, RWAs like BUIDL present a huge opportunity to integrate institutional-grade investments into the DeFi space, making it much more robust in nature.
Increased Adoption of Tokenized Assets
BlackRock’s BUIDL fund has grown extremely quickly since its launch in March, surpassing $500 million in assets under management in less than four months. That’s all part of a growing tide of tokenized assets-according to data from Dune Analytics, $3.4 billion worth of tokenized treasury funds are now onchain.
Other participants in the space are also testing the waters with BUIDL-backed stablecoins, like Ethena Labs. The USDtb of Ethena, launched on Dec. 16, has gathered a total value locked of $89 million.
Bridging DeFi and Traditional Finance
If adopted, this vote could be a game-changer in integrating traditional finance into DeFi by Frax Finance. Through the adoption of tokenized RWAs such as BUIDL, the stablecoin model of Frax Finance will combine institutional-grade security with the innovation enabled by blockchain technology.
Voting closes on Jan. 1, and the result might shape the next wave of stablecoin adoption in crypto.
