The Frax community has approved a proposal to use BlackRock’s Institutional Digital Liquidity Fund (BUIDL) as collateral for its upcoming frxUSD stablecoin.
The proposal, identified as FIP-418, received unanimous support after a six-day voting period.
Growing demand for BlackRock’s BUIDL fund
BlackRock’s BUIDL fund manages over $648 million in assets and provides yield-generating opportunities for frxUSD holders. Reaching this approval is an important step for the Frax Protocol.
BlackRock is the world’s largest asset manager, with over $10.4 trillion in global assets. As such, being backed by its tokenized fund could potentially minimize counterparty risk for the stablecoin collateral.
Frax Protocol Proposal Receives 100% of Votes to Use BUIDL Fund. Source: Snapshot
Furthermore, this move reflects a growing trend among stablecoin projects to introduce yield options that financially reward holders while maintaining stability.
Securitize, the brokerage that manages the BUIDL fund, initially proposed the idea on December 22. The frxUSD stablecoin will be pegged to the US dollar at a 1:1 ratio and backed by US government bonds through BUIDL.
Meanwhile, other projects have also adopted BUIDL as collateral for stablecoins. Ethena Labs launched the USDtb (USDTB) stablecoin on December 16, backed by the BUIDL fund. The asset’s current market cap is $70 million.
In November, Curve Finance allowed users to mint Elixir’s deUSD (DEUSD) stablecoin using BUIDL as collateral.
Distribution of BlackRock BUIDL Fund. Source: DeFilLama
The rise of tokenization of real-world assets
By the end of 2024, BlackRock had expanded BUIDL to five major blockchains. These included Aptos, Arbitrum, Avalanche, Optimism, and Polygon.
These developments are in line with BlackRock’s broader digital asset strategy, which includes initiatives such as the IBIT Bitcoin ETF and tokenized funds.
Overall, the adoption of tokenized real-world assets (RWAs) continues to grow. In 2024, several major players achieved milestones in this area, setting the stage for further developments in 2025.
For example, Tether plans to launch its Hadron RWA tokenization platform by February. This will offer institutional investors direct access via APIs.
Additionally, Hedera has integrated Chainlink Data Feeds and Proof of Reserve mechanisms to enhance its DeFi and RWA capabilities.
Global RWA Tokenization Market Overview. Source: RWA.XYZ
In short, the Frax community’s decision to integrate BlackRock’s BUIDL fund into its stablecoin highlights the growing overlap between traditional finance and blockchain-based innovations.
Furthermore, this move reflects the potential of tokenizing real-world assets to transform the stablecoin industry.
The article Frax Protocol to Support frxUSD Stablecoin with BlackRock Fund appeared first on BeInCrypto.
