Frax Finance has launched the frxUSD stablecoin, backed by BlackRock’s BUIDL fund, merging traditional finance stability with blockchain transparency. This collaboration offers users yield-bearing opportunities and bridging decentralized finance (DeFi) with institutional financial systems.
Recently, the newly launched stablecoin by Frax Finance will be collateralized with the BlackRock’s United States Dollar Institutional Digital Liquidity Fund, colloquially called BUIDL. It is a step toward to integrating traditional financial products into the decentralized ecosystem, aligning with the growing trend of stablecoin tokenization backed by real-world assets.
Collateralization by BlackRock’s BUIDL Fund
The Frax community passed governance proposal FIP-418, which allowed BUIDL to be collateralized for the frxUSD stablecoin. BUIDL, tokenized by BlackRock, now has over $648 million in assets under management and invests mostly in liquid instruments such as U.S. Treasury bills and repurchase agreements.
The tokenized fund is dedicated to decreasing counterparty risks and maximizing yields on frxUSD for holders, taking them to sources of financial opportunity in traditional markets of finance.
Features of frxUSD
The frxUSD stablecoin will maintain a peg at 1:1 against the U.S. dollar. Yield-bearing opportunities for the holder are also possible through the benefits accrued to the holder by virtue of the underlying assets within the BUIDL fund.
Another thing, Paxos has been partnered with Frax Finance in a manner where it enables direct conversion of the stablecoin, frxUSD, into fiat currency for easy redemption into the stablecoin of the U.S. dollars.
Frax also intends to apply for access to the U.S. Federal Reserve Master Account, so frxUSD can be used in regulated markets, which will further increase its legitimacy and usability.
BUIDL-Backed Stablecoins
Frax’s frxUSD falls under a more recent trend of RWA backings in the stablecoin market. Other stablecoin projects include Ethena Labs, with BUIDL-backed stablecoins such as USDtb, whose emphasis is placed on reducing volatility within synthetic dollar issuance.
Decentralized exchange Curve Finance now accepts BUIDL as collateral to mint the Elixir’s deUSD stablecoin, thus a growing tendency for tokenized funds to back stablecoins.
Accelerating this trend have seen changes in the regulatory environment. For example, the Markets in Crypto-Assets (MiCA) regulation of the European Union, adopted in December 2024, sets new standards for the issuers of stablecoins. This pushes towards greater transparency and accountability in the market.
BlackRock in Digital Assets
BlackRock is growing in the digital asset space. The asset management giant now oversees more than $10.4 trillion in assets worldwide. This company’s entrance into the tokenized asset market and its support for stablecoins such as frxUSD and USDtb point to a gradual institutional embrace of blockchain-based financial products.
The strategic move into the crypto space by BlackRock, through achievements such as Bitcoin ETFs, signals a greater shift toward integration of traditional finance with the new digital asset economy. More traditional financial institutions will find themselves in the space, and it is in such an environment that stablecoins, such as frxUSD, supported by real-world assets.
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