The Frax community decided to pass FIP-418 to allow BlackRock’s USD Institutional Digital Liquidity Fund (USD BUIDL) to be used as collateral for the Frax-USD (frxUSD) stablecoin.
The tokenized fund offers frxUSD holders a potential yield opportunity, according to the proposal, which passed unanimously after six days of voting.
BlackRock’s funds, which have over $10.4 trillion in assets under management, also minimize counterparty risk by providing stablecoins as collateral. After the vote, Frax Finance founder Sam Kazemian said in a statement:
“FrxUSD combines the transparency and programmability of blockchain technology with the trust and stability of BlackRock’s leading financial products. “This collaboration is an important step in connecting traditional finance and decentralized systems.”
The Frax community’s decision to use BUIDL as collateral for its upcoming stablecoin is part of a broader trend to create stablecoins with yields that provide financial rewards to holders.
FIP-418 passed unanimously. source: Frax Financial Community
relevant: Stablecoin Adoption, ETF to Drive Crypto Performance in 2025: Citi
BUIDL becomes a collateral asset for stablecoins
Securitize, the brokerage firm for the BUIDL fund, initially proposed backing frxUSD with BUIDL on December 22nd. The upcoming stablecoin is pegged to the U.S. dollar at a 1:1 ratio and backed by U.S. government securities.
Last September, Ethena Labs, developer of the USDe (USDE) synthetic dollar, announced the development of a BUIDL-backed stablecoin called USDtb (USDTB).
The BUIDL-backed stablecoin was launched on December 16 and currently has a market capitalization of approximately $70 million.
Ethena Labs said the BUIDL-backed stablecoin, a separate product from Ethena’s USDe, could help stabilize synthetic dollars during periods of negative funding rates and bear markets.
Decentralized exchange Curve Finance announced that users will be able to mint Elixir’s deUSD (DEUSD) yielding stablecoin on its platform using BUIDL as collateral in November 2024.
WeFi co-founder Reeve Collins said in a recent interview with Cointelegraph that demand for stable assets with yield will continue to grow as investors switch from traditional stablecoins that do not offer interest opportunities.
Tech executives said this trend toward real-world assets with yields will be amplified by agent AI and account abstraction that will simplify the yield generation mechanisms of next-generation stablecoins.
magazine: Unstable Coins: Depegs, bank runs and other risks loom.