According to Cointelegraph, the Frax Finance community has initiated a vote to adopt BlackRock's USD Institutional Digital Liquidity Fund Ltd (BUIDL) as a reserve asset for the proposed stablecoin, Frax USD (frxUSD). The voting process, which began on December 26, has seen unanimous support from the decentralized finance (DeFi) lending protocol tokenholders (FXS). The discussion surrounding the proposal has also been overwhelmingly positive, with the voting period set to conclude on January 1, 2025.
The proposal outlines several potential benefits for Frax USD, including the creation of yield opportunities, enhanced liquidity, improved transfer options, and reduced counter-party risk, thanks to BlackRock's backing. The discussion, initiated by Securitize, a real-world asset tokenization platform and broker-dealer for BlackRock’s BUIDL, highlighted the potential for bridging traditional finance and DeFi. A user identified as achaffee emphasized that tokenized real-world assets (RWAs) serve as an effective bridge by bringing institutional-grade investments onto the blockchain. Achaffee noted that in the past nine months, significant players, including DAOs and decentralized protocols, have issued large, public requests for proposals (RFPs) to explore how they can effectively bolster their treasuries or back their stablecoins with RWAs. These early explorations signify a notable evolution in how decentralized entities manage their financial resources and consider cross-industry asset strategies.
BUIDL has achieved over half a billion dollars in assets under management (AUM) within four months of its launch on March 15. The fund's price is pegged 1:1 with the US dollar and provides daily accrued dividends to investors monthly through a partnership with Securitize. It primarily invests in US government securities. Data from Dune Analytics, compiled by 21Shares, indicates that $3.4 billion worth of tokenized treasury funds are now on-chain.
Frax Finance is not the first to consider a BUIDL-backed stablecoin. Ethena Labs, the developer behind the USDe synthetic dollar, announced on September 26 that it was working on a BUIDL-backed stablecoin. This stablecoin, named USDtb, is a separate product from Ethena’s USDe. USDtb went live on December 16 and has accumulated $89 million in total value locked (TVL), according to data from DefiLlama.