The voting period to onboard BlackRock’s USD Institutional Digital Liquidity Fund as a reserve asset for Frax Finance’s new stablecoin, Frax USD, opens on Dec. 27 until Jan. 1, 2025.
Decentralized finance protocol Frax (FRAX) Finance is getting ready to launch its new stablecoin, frxUSD. But first, the protocol needs to determine whether to adopt Blackrock’s USD Institutional Digital Liquidity Fund or BUIDL as its reserve asset.
To make this decision, Frax Finance shared a proposal that introduces the features, benefits and background necessary to understand BUIDL and how it will function as a an on-chain, backing asset for Frax USD. The protocol has invited the Frax community to vote on whether the partnership will proceed.
“The vote to onboard Blackrock $BUIDL as the first backing asset for the new Frax USD (frxUSD) stablecoin is live!” wrote Frax Finance on its official X post.
On Dec. 23, Frax Finance announced that BlackRock, the leading asset management firm, proposed to become the custodian backing Frax USD in a separate X post.
https://twitter.com/fraxfinance/status/1872356878308851948
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According to the shared proposal, BUIDL is a tokenized product that invests all of its total assets into government-issued assets, namely cash, U.S. Treasury bills, repurchased agreements, notes, and other obligations. It is promoted as a “blockchain-based investment solution that can be used alongside other investments as a reserve backing of stable assets.”
Some of the benefits of holding BUIDL as a reserve backing assets listed in the proposal include generating yield opportunities, strengthening liquidity, providing multiple transfer options, as well as minimizing external risk with the aid of major financial firms such as Securitize, BlackRock, and Bank of New York Mellon.
“By working with Securitize and BlackRock to use BUIDL as a backing asset for Frax USD, Frax USD will gain exposure to one of the most liquid assets in the world, while still reaping the benefits of yield-bearing, on-chain efficiencies of DeFi,” wrote Nader Ghazvini, Head of Governance at Frax Finance.
In July 2024, BlackRock tokenized treasury fund BUIDL gained more than $500 million in assets under management after its launch in April this year. BUIDL’s price is pegged to the U.S. dollar, investors receive daily accrued dividends paid directly on a monthly basis through its partnership with Securitize.
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