Securitize is brokering a deal for BlackRock’s BUIDL token to be integrated as collateral for the soon-to-be-released Frax USD stablecoin. The Frax improvement proposal is undergoing a governance process; should it pass, BUIDL will be part of Frax.
Securitize is the brokerage firm for the BlackRock USD Institutional Digital Liquidity Fund and its BUIDL token. The firm developed the Frax Finance governance proposal. Part of the proposal mentions. “In addition to providing Frax USD utility, relative safety, and convenience, Frax USD can significantly reduce counterparty risk for its reserves by working with BlackRock.”
Although the proposal must undergo a community vote, the prospects are good for BUIDL. The proposal has received public support, with one response from alexd3366 reading:
I wholeheartedly support this proposal! As a proud investor and big believer in the project’s potential, I’ve witnessed the dedication and expertise that’s gone into shaping this initiative.
~alexd3366
BlackRock’s BUIDL is making a niche in the collateral market
The Frax stablecoin proposal is not the first for BUIDL. If it goes through, it will join other stablecoins, including Ethena’s USDtb, which works with BUIDL token as a collateral asset. BUIDL has over $530 million worth of assets under management, most in short-term US treasury bills.
Securize made the strategic move as Frax’s team is exploring rebranding its core stablecoin to Frax USD (frxUSD). The plans for rebranding are described in another governance proposal, which also talks of introducing Staked Frax USD (sfrxUSD) as a yield-bearing counterpart. The proposal clarifies that the frxUSD token will facilitate direct conversions into fiat currency while working with Paxos.
New mint-redeem system, motivation for approval
Frax Finance has put in place a new mint-redeem system, known as enshrined custodians, to accompany the stablecoin launch. Through the mint-redeem system, users will have mint-redeem rights to frxUSD if governance allows their assets to back the frxUSD. If BlacRock’s proposal wins, any authentic user can mint 1 BUIDL and send it to the on-chain custodian to receive a frxUSD.
While BlackRock’s proposal receives a fair share of public support, it isn’t the only one that can authorize a proposal. Superstate, a competing tokenized fund platform, submitted two governance proposals. If their proposal is passed, frxUSD will adopt its USTB Treasury bills and USCC crypto-carry fund to support the stablecoin. Superstate’s proposals call on Frax to allocate up to $20 million to its USCC fund and up to $100 million to its USTB fund.
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