The Frax community has approved the proposal FIP-418, which allows the stablecoin frxUSD to be backed by BlackRock’s United States dollar Institutional Digital Liquidity Fund (BUIDL). This decision follows a six-day voting period during which the proposal was unanimously passed. The use of BUIDL as collateral is expected to offer yield-bearing opportunities for frxUSD holders while minimizing counterparty risk, given BlackRock’s significant asset management portfolio of over $10.4 trillion.
Frax Finance founder Sam Kazemian highlighted the synergy between blockchain technology and BlackRock’s financial stability, noting the collaboration as a pivotal step toward integrating traditional finance with decentralized systems. This initiative is part of a broader trend to develop stablecoins that not only maintain value but also reward holders with financial benefits.
Securitize, the brokerage firm managing the BUIDL fund, initially suggested using BUIDL as collateral for frxUSD last December. The stablecoin is pegged to the US dollar on a 1:1 basis and is supported by US government securities.
In related developments, Ethena Labs announced the BUIDL-backed stablecoin USDtb, aiming to stabilize synthetic dollars during market volatility. Additionally, decentralized exchange Curve Finance will enable users to mint Elixir’s yield-bearing stablecoin DEUSD using BUIDL as collateral, starting November 2024.
Industry experts like WeFi co-founder Reeve Collins predict growing demand for yield-bearing stable assets, bolstered by advancements in technology and artificial intelligence. This evolution points to an increasing investor shift from traditional stablecoins to ones offering accrued interest.
