Vote on Using BlackRock’s BUIDL Asset as Backing for Frax Stablecoin Now Live
The Frax Finance community has officially opened a vote to adopt BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) as a reserve asset for the proposed stablecoin Frax USD (frxUSD). This decision is set to have far-reaching implications for the decentralized finance (DeFi) sector, particularly in terms of creating new yield opportunities and reducing counter-party risk.
Background on the Vote
The vote was initiated by Securitize, a real-world asset tokenization platform that serves as the broker-dealer for BlackRock’s BUIDL fund. The proposal aims to utilize BUIDL as a reserve asset for Frax USD, which would provide several benefits to users. These include increased yield opportunities due to the potential for daily dividends, deeper liquidity in the market, transfer options between traditional finance and DeFi, and reduced counter-party risk.
Comments in Favor of the Proposal
The discussion surrounding the proposal has been overwhelmingly positive, with all comments cast by token holders (FXS) thus far being in favor of adopting BUIDL as a reserve asset for Frax USD. The community’s enthusiasm is reflected in their comments, highlighting the potential benefits and innovation that this move could bring.
Benefits of Adopting BUIDL
According to achaffee, a user in the discussion, tokenized real-world assets (RWAs) ‘provide an excellent bridge’ between traditional finance and DeFi by bringing institutional-grade investments onchain. They noted:
"In the past 9 months alone, we’ve seen major players including DAOs and decentralized protocols put out large, public RFPs to explore how they can most effectively bolster their treasuries or back their stablecoins with RWAs."
This trend marks a significant evolution in how decentralized players manage their financial resources and consider cross-industry asset strategies. The use of BUIDL as a reserve asset for Frax USD is expected to further facilitate this shift.
BUIDL Fund Performance
BlackRock’s BUIDL fund has seen impressive growth since its launch on March 15, reaching over half a billion dollars in assets under management (AUM) within less than four months. The fund invests in US government securities and pays daily accrued dividends directly to investors each month through a partnership with Securitize.
Tokenized Treasury Funds
According to Dune Analytics data compiled by 21Shares, $3.4 billion worth of tokenized treasury funds are now onchain. This development underscores the growing interest in decentralized finance and the potential for tokenized assets to bridge traditional finance and DeFi.
Comparison with Ethena’s USDtb
Frax isn’t the first entity to consider a BUIDL-backed stablecoin. In September, Ethena Labs announced plans to develop a separate product offering from its USDe synthetic dollar called USDtb. This stablecoin has since gone live on December 16 and has accrued $89 million in total value locked (TVL), according to data from DefiLlama.
Conclusion
The Frax Finance community’s vote to adopt BlackRock’s BUIDL fund as a reserve asset for the proposed stablecoin Frax USD marks an exciting development in the DeFi sector. The potential benefits of this move, including increased yield opportunities and reduced counter-party risk, have garnered significant support from token holders and industry experts alike. As the vote remains open until January 1, 2025, it will be interesting to see how the community responds to this innovative proposal.