Securitize, the brokerage firm for the tokenized BlackRock USD Institutional Digital Liquidity Fund (BUIDL), has submitted a Frax enhancement proposal to add BUIDL as backing collateral for the Frax USD stablecoin.
According to the proposed enhancements, using BUIDL as a collateral reserve asset provides return opportunities, deeper liquidity and transfer options, and reduced counterparty risk thanks to the support of BlackRock, the world’s largest asset manager.
The proposal is still subject to a community vote before BUIDL, which invests in U.S. government securities, is added as a reserve asset for the proposed Frax USD stablecoin.
Tokenized real assets (RWAs) are gaining popularity as collateral backing and reserve assets for stablecoins due to their cost-effectiveness, fast final completion times, and the potential to provide unique high-yield bearing opportunities for holders.
BUIDL statistics and metrics. source: RWA.XYZ
relevant: Ethena’s optimism about the USDtb stablecoin is strong as it hit $65 million TVL on the first day.
BUIDL focuses on the collateral market
Ethena Labs, the developer of Ethena responsible for the USDe synthetic dollar, announced the development of a BUIDL-backed stablecoin in September 2024.
The BUIDL-backed stablecoin, called USDtb, is a separate product from Ethena’s USDe. USDtb was launched on December 16 and accumulated approximately $65 million in total value locked (TVL) on its first trading day.
Unlike USDe, which relies on a complex delta-neutral trading strategy to issue stablecoins, USDtb is overcollateralized with the US dollar in a 1:1 ratio with cash and short-term US government securities held by the BUIDL fund.
In October 2024, BlackRock began pursuing BUIDL as collateral on its cryptocurrency derivatives exchange. The asset manager has reportedly begun talks with Binance, OKX, and Deribit to integrate tokenized funds as collateral on its platform.
The incorporation of BUIDL as collateral for cryptocurrency derivatives trading will challenge the dominance of existing stablecoin issuers such as Tether and Circle, which currently dominate collateral reserves for digital asset derivatives trading.
Starting in November 2024, stablecoins with a deUSD yield on the Elixir protocol can be minted on the Curve decentralized exchange using BUIDL as collateral and exchanged for other stablecoin assets in Curve’s liquidity pool.
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