Frax Finance is considering a proposal by Securitize Markets to integrate BlackRock's BUIDL token as collateral for its upcoming Frax USD stablecoin.
Frax Finance is considering a proposal by Securitize Markets to integrate BlackRock's BUIDL token as collateral for its upcoming Frax USD stablecoin. The BUIDL token, backed by over $530 million in short-term U.S. Treasury bills, represents BlackRock’s Institutional Digital Liquidity Fund. This move, if approved by the Frax DAO, aims to reduce counterparty risk and improve liquidity while providing yield opportunities.
Frax USD, set to relaunch as frxUSD, will feature a new mint-redeem system where governance-approved entities can mint frxUSD by sending assets like BUIDL to designated on-chain contracts. Frax founder Sam Kazemian explained that this system, called "enshrined custodians," would enable a one-to-one minting mechanism. Alongside frxUSD, Frax plans to introduce Staked Frax USD (sfrxUSD), a yield-bearing counterpart.
The proposal has received strong support from the Frax DAO community, with members expressing optimism about the integration of traditional finance (TradFi) assets into decentralized finance (DeFi). One member described the proposal as a step towards shaping the future of finance.
Superstate, a competing tokenized fund platform, has also submitted proposals to use its USTB Treasury and USCC crypto arbitrage funds as backing for frxUSD. Superstate has requested allocations of $100 million for USTB and $20 million for USCC. These proposals align with Frax’s strategy to back frxUSD with high-quality, easily redeemable assets.
BlackRock has been actively promoting BUIDL in crypto markets. The fund is now used as collateral for stablecoins like Elixir Protocol's deUSD, which can be minted and exchanged on Curve. In addition, BlackRock has discussed integrating BUIDL as collateral for crypto derivatives trading with platforms like Binance and OKX.
BUIDL has gained prominence with the launch of Ethena Labs’ USDtb, a BUIDL-backed stablecoin released in December. USDtb quickly achieved $65 million in total value locked (TVL) on its first day, showcasing the growing appeal of tokenized real-world assets. Unlike synthetic dollar stablecoins, USDtb is fully collateralized by U.S. government securities at a 1:1 ratio.
Frax’s rebranding and upgrades reflect its broader goals of improving adoption and accessibility. If its partnership with Paxos materializes, frxUSD could allow direct fiat conversions and potentially gain access to a U.S. Federal Reserve Master Account. According to a governance proposal, frxUSD will be backed by stablecoin tokens, collateralized debt positions in Fraxlend, and cash-equivalent real-world assets.
The exact composition of frxUSD reserves, including the potential allocation to BUIDL, remains undetermined. However, integrating tokenized funds like BUIDL and Superstate’s offerings signals a growing shift toward real-world assets as the backbone of stablecoin systems.
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