Frax Finance Backs frxUSD Stablecoin with BlackRock’s BUIDL Token
Frax Finance, a prominent Decentralized Finance (DeFi) protocol, is innovating in the stablecoin market with its frxUSD stablecoin, which is backed by BlackRock's BUIDL tokenized money market fund, as reported by The Block.
BlackRock’s BUIDL Token: A Cornerstone for Stability
BlackRock’s BUIDL token represents a digital money market fund managed by the world’s largest asset manager. This fund invests in high-quality assets such as US Treasury bills and cash, providing significant trust and stability.
By utilizing BUIDL to support its frxUSD stablecoin, Frax Finance establishes new benchmarks for security and liquidity in the crypto space. Sam Kazemian, founder of Frax Finance, noted the importance of this collaboration.
He stated that frxUSD integrates blockchain transparency with BlackRock's premium treasury assets. The partnership was expedited by Securitize, the broker-dealer for BlackRock's BUIDL token, which prepared and submitted a governance proposal to Frax’s Decentralized Autonomous Organization (DAO). This proposal received strong backing and quick approval, reflecting the DAO’s confidence in the initiative.
Frax confirmed that BUIDL will function as a primary reserve asset for creating and redeeming frxUSD, establishing a stable foundation for the token. Additionally, Ethena's USDtb stablecoin is also backed by BlackRock’s BUIDL fund, facilitated by Securitize.
Frax Finance frxUSD: A Bridge Between DeFi and Traditional Finance
The frxUSD stablecoin is designed for seamless on-chain and off-chain usability. In collaboration with Paxos, frxUSD holders can convert the token directly into fiat currency, enhancing accessibility for both everyday users and institutional investors.
This feature aligns with Frax’s broader objective of obtaining access to the US Federal Reserve Master Account, which would reinforce frxUSD’s status as a functional stablecoin. The choice of BlackRock’s BUIDL token as the backing for frxUSD underscores the emphasis on reliability and trust.
This strategic decision reflects Frax’s ambition to develop a stablecoin that garners the confidence of both DeFi and traditional finance participants. By leveraging BUIDL, Frax bridges two financial sectors, setting the stage for a new generation of stablecoins.
As projects like Ethena (ENA) continue to gain momentum, the success of frxUSD may encourage further partnerships linking blockchain with traditional finance.
Following Ripple's strategy for integrating DeFi with traditional finance, the company launched RLUSD stablecoin in 2024. This token is pegged to the US dollar and supported by government bonds, USD deposits, and cash equivalents, while advancing tokenization efforts through RLUSD and its L1 protocol XRP Ledger.