Key Takeaways
- Frax Finance is a decentralized stablecoin protocol that aims to integrate BlackRock’s BUIDL token as a reserve asset.
- Securitize Markets is the transfer agent and broker-dealer for this collaboration.n
- BUIDL collaboration provides Frax USD utility, relative safety, and convenience
- BUIDL manages more than $530 million worth of assets mostly as Short-term US Treasury bills.
- The frxUSD token is designed to facilitate direct conversion into fiat currency through a partnership with Parox.
- The integration is designed to provide mint-redeem rights of frxUSD if the governance supports their asset to back frxUSD.
- The integration would challenge the supremacy of stable coins like Tether and Circle.
Frax Finance is a decentralized stablecoin protocol that plans to integrate BlackRock’s BUIDL token as a reserve asset. This reserve asset is maintained to back up its upcoming Frax USD stablecoin. This plan awaits approval through its governance process. Securitize Markets is the transfer agent and broker-dealer for the deal.
Proposal Highlights and Governance Updates for frxUSD
The Frax Finance governance proposal states that collaboration with BlackRock can significantly reduce counterparty risks. It also provides Frax USD utility, relative safety, and convenience. If the proposal gets passed the Frax USD will likely follow the pathway of stable coins like Ethena’s USDtb in adopting BUIDL as its backing asset. BUIDL currently manages more than $530 million worth of assets mostly in the form of Short-term US Treasury bills.
The proposal is yet to be passed by voting. Frax Finance DAO members’ early responses suggest a universal positive trend. One such response states that he is confident in the proposal that combines the best of TradFi & DeFi. The proposal gains traction as Frax’s core team plans to rebrand the core stable coin of the platform to FraxUSD(frxUSD).
Staked Frax USD is introduced as a yield-bearing counterpart of the platform. The frxUSD token will facilitate direct conversion into fiat currency through a partnership with Parox. The proposal is designed to benefit from the attempts of Frax Finance to gain access to a US Federal Reserve Master Account.
The frxUSD proposal suggests that all the newly upgraded frxUSD stablecoins will be backed by stablecoins such as USDe, USDC, and sDAI. CDP from Fraxlend and the cash equivalent RWA assets from its custodians. The percentage of frxUSD’s gets backed by BUIDL token is not yet determined. The two proposals should be passed on to know further details.
The stablecoin launch will be accompanied by a new mint redeem system. Sam Kazemian, Founder of Frax Finance stated that they have developed a new system called enshrined custodians. This system is designed to provide mint-redeem rights of frxUSD if the governance supports their asset to back frxUSD.
Another tokenized funding platform Superstate suggested two governance proposals that suggest the adoption of USTB Treasury Bills and USCC crypto carry fund as a backup for the stablecoin. Frax Finance plans to back $frxUSD with high-quality assets that can be minted or redeemed to ensure the stability and growth of the coin. The proposal from Superstate for Fraxs allocation of about $20 million to its USCC fund and USTB fund allocation of $100 million.
BUIDL Focuses on Collateral Markets
The developers of Ethena, Ethena Labs are responsible for the USDe synthetic dollar. In September 2024 they announced the development of BUIDL-backed stablecoin.
Dubbed USDtb is a BUIDL-backed stablecoin from Ethena USDe. Usdtb was released on Dec 16 and accumulated a total value locked of approximately $65 million on the first trading day.
USDe has relied on a complex delta-neutral trading strategy for issuing stablecoins.USDtb is more collateralized by cash and short-term government securities held by BUIDL. The ratio between them is 1:1 with the US Dollars.BlackRock started pushing for BUIDL as collateral on the crypto derivative exchanges.
As per the reports the asset manager entered into negotiations with Binance, OKX, and Derbit for the integration of tokenized funds as collateral on their platforms. The integration of BUIDL as collateral for the crypto derivatives trading would result in challenging the supremacy of stable coins like Tether and Circle. These coins are currently dominating the collateral reserves for digital asset derivative trading.
The elixir protocol’s deUSD stablecoin can be minted on the curve decentralized exchange. This minting process can be completed by using BUIDL as backing collateral. It can be exchanged with other assets in Curve’s liquidity pools.
Also Read: El Salvador To Scale Down Bitcoin Policies As Part Of $3.5 Billion IMF Loan Deal
