- Frax Finance may integrate BlackRock’s BUIDL token to enhance frxUSD’s stability, reducing counterparty risks.
- Frax Finance members support using BUIDL as a reserve for frxUSD, blending TradFi and DeFi for the future of finance.
- Competing proposals, like Superstate’s, aim to back frxUSD with high-quality assets, boosting its stability and growth potential.
Frax Finance, the decentralized stablecoin protocol, may soon integrate BlackRock’s BUIDL token as a reserve asset for its upcoming Frax USD (frxUSD) stablecoin. This potential shift comes after a proposal was put forward to Frax Finance’s decentralized autonomous organization (DAO). The proposal suggests using BUIDL to back frxUSD, enhancing its stability and utility.
New Proposal for Integration
Securitize Markets, acting as the transfer agent for BlackRock’s USD Institutional Digital Liquidity Fund, authored the proposal. They emphasized that working with BlackRock could reduce counterparty risk for Frax USD reserves. In addition, the integration of BUIDL could further improve the safety and convenience of the stablecoin, according to the proposal.
Should the proposal pass, Frax USD would follow the example of stablecoins like Ethena’s USDtb, which also uses BUIDL as a backing asset. Currently, BUIDL holds over $530 million in assets, primarily consisting of short-term U.S. Treasury bills. This makes BUIDL a stable and secure choice for supporting frxUSD.
Potential Impact of the Proposal
Frax Finance members have shown support for the proposal, indicating its potential to bring together traditional finance (TradFi) and decentralized finance (DeFi). One DAO member remarked that the partnership could reshape the future of finance.
This proposal comes alongside Frax Finance’s plans to rebrand its core stablecoin as frxUSD and introduce Staked Frax USD (sfrxUSD) as a yield-bearing counterpart. Frax aims to offer direct fiat conversions of frxUSD through a partnership with Paxos. The new mint-redeem system would also allow entities to acquire mint-redeem rights for frxUSD by backing it with assets approved by governance.
Competing Proposals and Future Considerations
Despite the positive sentiment surrounding BlackRock’s involvement, other proposals are also vying for a role in supporting frxUSD. Competing tokenized fund platform Superstate has suggested backing frxUSD with its USTB Treasury bills and USCC crypto-carry fund.
These funds would offer additional opportunities for mint-redeem processes, contributing to the stability and growth of Frax USD. Frax Finance founder Sam Kazemian noted that BlackRock is not the only potential custodian. He emphasized that Superstate’s funds could also provide strong backing for frxUSD, ensuring its long-term success.
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