The Frax community made headlines by endorsing a groundbreaking proposal to integrate BlackRock's Institutional Digital Liquidity Fund (BUIDL) as collateral for its impending frxUSD stablecoin. This approval, known as FIP-418, marked a crucial milestone for the Frax Protocol after garnering unanimous support following a six-day voting period.
Managing assets worth over $648 million, BlackRock’s BUIDL fund offers yield-generating avenues for frxUSD stakeholders. This collaboration with the world's foremost asset manager, BlackRock—overseeing more than $10.4 trillion in global assets—aims to mitigate counterparty risks associated with the stablecoin’s collateral through its tokenized fund.
The proposal to utilize the BUIDL fund received 100% approval from the Frax Protocol community, underscoring the trend of stablecoin projects introducing yield-bearing options to financially incentivize and ensure the stability of their holdings.
The concept was initially suggested by Securitize, the brokerage handling the BUIDL fund, on December 22. The frxUSD stablecoin will mirror the US dollar's value at a 1:1 ratio, underpinned by US government securities sourced through BUIDL.
Elsewhere, projects have similarly adopted BUIDL as stablecoin collateral. For instance, Ethena Labs released the USDtb stablecoin, worth $70 million in market capitalization, on December 16, secured by BUIDL. Notably, in November, Curve Finance facilitated users to create Elixir’s deUSD stablecoin using BUIDL.
By late 2024, BlackRock had expanded BUIDL to several prominent blockchains, including Aptos, Arbitrum, Avalanche, Optimism, and Polygon. This expansion aligns with BlackRock’s comprehensive digital asset strategy, encompassing ventures such as the IBIT Bitcoin ETF and other tokenized funds.
In a broader context, 2024 witnessed significant advances in real-world asset tokenization. Major industry players achieved milestones, setting the momentum for further progress anticipated in 2025. For instance, Tether plans to launch the Hadron RWA tokenization platform by February, providing institutional investors direct access via APIs. In addition, Hedera has enhanced its DeFi and RWA offerings by integrating Chainlink Data Feeds and Proof of Reserve mechanisms.
In summary, Frax's move to incorporate BlackRock’s BUIDL fund into its frxUSD stablecoin symbolizes the converging worlds of traditional finance and blockchain innovation. This evolution highlights real-world asset tokenization's potential to redefine the stablecoin landscape, possibly revolutionizing the industry.