The Frax community has voted to pass FIP-418 to use BlackRock’s United States dollar Institutional Digital Liquidity Fund (BUIDL) as backing collateral for the Frax-USD (frxUSD) stablecoin.
According to the proposal, which passed unanimously after six days of voting, the tokenized fund provides potential yield-bearing opportunities for frxUSD holders.
Counterparty risk is also minimized by collateralizing the stablecoin with a fund from BlackRock — which has over $10.4 trillion in assets under management. Following the vote, Frax Finance founder Sam Kazemian wrote:
“frxUSD combines the transparency and programmability of blockchain technology with the trust and stability of BlackRock’s prime treasury offerings. This collaboration is a significant step toward bridging traditional finance with decentralized systems.”
The Frax community’s decision to use BUIDL as collateral for the upcoming stablecoin is part of a broader trend to create yield-bearing stablecoins that provide holders with financial rewards.
Related: Stablecoin adoption, ETFs to propel crypto performance in 2025: Citi
BUIDL becomes collateral asset for stablecoins
Securitize, the brokerage firm for the BUIDL fund, initially proposed backing frxUSD with BUIDL on Dec. 22. The upcoming stablecoin is pegged to the US dollar at a 1:1 ratio and backed by US government securities.
In September, Ethena Labs — the developer of the USDe synthetic dollar — announced the development of a BUIDL-backed stablecoin named USDtb (USDTB).
The BUIDL-backed stablecoin debuted on Dec. 16 and has a current market capitalization of roughly $70 million.
Ethena Labs said that the BUIDL-backed stablecoin, which is a separate product from Ethena’s USDe, could help stabilize the synthetic dollar during times of negative funding rates and bearish markets.
Decentralized exchange Curve Finance announced that users would be able to mint Elixir’s deUSD (DEUSD) yield-bearing stablecoin on the platform using BUIDL as collateral in November 2024.
WeFi co-founder Reeve Collins recently told Cointelegraph that yield-bearing stable assets will continue to see increasing demand as investors shift from traditional stablecoins that do not provide interest opportunities.
The tech executive said that this trend toward yield-bearing real-world assets would be amplified by agentic AI and account abstraction that would simplify yield-accrual mechanisms for next-generation stablecoins.
Magazine: Unstablecoins: Depegging, bank runs and other risks loom
