- Frax Finance approved FIP-418 to use BlackRock’s BUIDL token as frxUSD collateral.
- The partnership bridges decentralized finance with traditional asset security.
The Frax community has approved FIP-418, allowing BlackRock’s BUIDL token to collateralize the frxUSD stablecoin. This proposal passed unanimously after six days of voting, Frax Finance announced on Thursday.
BlackRock’s BUIDL token, a tokenized money market fund, invests in U.S. Treasury bills, cash, and repurchase agreements. It ensures stability, liquidity, and reduced counterparty risk for frxUSD holders. With over $10.4 trillion in assets under management, BlackRock adds trust to the partnership.
Frax Finance founder Sam Kazemian emphasized the synergy between blockchain transparency and BlackRock’s treasury reliability. He called the collaboration a milestone in bridging decentralized and traditional finance. The frxUSD stablecoin will be pegged 1:1 to the U.S. dollar, backed by U.S. government securities.
Are BUIDL and Yielding Stablecoins the Future?
Securitize, the brokerage firm for BlackRock’s BUIDL, initially proposed using BUIDL as collateral on December 22. The stablecoin also supports fiat conversions through Paxos, making it accessible to retail and institutional users.
Frax Finance’s efforts align with its pursuit of a U.S. Federal Reserve Master Account. This would further legitimize frxUSD as a secure and functional stablecoin in both DeFi and CeFi spaces.
The move follows a growing trend of yield-bearing stablecoins. These stablecoins combine stability with financial rewards, attracting investors seeking alternatives to non-yielding options. Curve Finance and Ethena Labs have also utilized BUIDL for stablecoins like USDtb and deUSD.
McKinsey projects tokenized assets to reach $2 trillion by 2030. Other estimates suggest values between $4 trillion and $16 trillion by the same year. Major firms, including Goldman Sachs, continue to expand tokenization projects, signaling massive growth potential.
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