- BlackRock’s BUIDL was proposed as collateral for Frax USD, enhancing liquidity and stability in DeFi.
- BUIDL offers yield opportunities and reduced counterparty risk with backing from U.S. government securities.
- Community vote to decide integration, reshaping stablecoin collateral trends in crypto markets.
Securitize, the brokerage firm behind the tokenized BlackRock US Dollar Institutional Digital Liquidity Fund (BUIDL), has submitted a proposal to the Frax community for integrating BUIDL as collateral behind Frax USD (Frax’s native stablecoin), an important step toward traditional finance more with decentralized finance (DeFi).
The proposal highlights several benefits of using BUIDL as a collateral reserve asset for Frax USD. BUIDL, backed by U.S. government securities, offers yield opportunities, deeper liquidity, and more flexible transfer options. Importantly, BUIDL’s backing by BlackRock, the world’s largest asset manager, significantly reduces counterparty risk, making it an attractive option for the Frax community.
However, before BUIDL can officially become a reserve asset for Frax USD, the proposal will undergo a community vote. If the vote passes, BUIDL’s tokenized form could bring stability and yield potential to Frax’s established stablecoin ecosystem.
According to the report, Tokenized real-world assets (RWAs) are gaining traction as collateral and reserve assets for stablecoins. The advantages are self-evident: RWAs introduce cost efficiencies, fast settlement times, and high-yield opportunities for holders. BUIDL’s contribution to this growing trend is ready to go live to increase the utility of stablecoins backed by traditional assets.
USDtb Stablecoin Hits $65M TVL on Launch
Ethena Labs, the developer behind Ethena and the USDe synthetic dollar, has also embraced the tokenization of real-world assets. In September 2024, Ethena Labs announced the development of a new BUIDL-backed stablecoin, USDtb. This stablecoin, which went live on December 16, 2024, amassed approximately $65 million in total value locked (TVL) on its first trading day.
Unlike USDe, which utilizes complex trading strategies to issue stablecoins, USDtb is overcollateralized by cash and short-term U.S. government securities held by the BUIDL fund in a 1:1 ratio with U.S. dollars, providing a simple and secure structure. BlackRock has also been pushing for BUIDL’s integration as collateral in the broader crypto derivatives market.
According to a Bloomberg report, in October 2024, the asset manager entered into discussions with major crypto exchanges, including Binance, OKX, and Deribit, to incorporate the tokenized fund into their platforms. The potential inclusion of BUIDL as collateral in these exchanges could challenge the dominance of leading stablecoin issuers such as Tether and Circle, which currently back most crypto derivatives trading.
BUIDL as the Future of Stablecoin Collateral in DeFi
Furthermore, although Elixir Protocol’s deUSD yield-bearing stablecoin was launched in November 2024, it already utilizes BUIDL as collateral on Curve’s decentralized exchange. This allows BUIDL to be exchanged with any other stablecoin in liquidity pools at Curve, further establishing it as an asset of value in the DeFi ecosystem.
If the proposal to integrate BUIDL into Frax USD goes through, the landscape for stablecoin collateral will be reshaped. The tokenized BlackRock fund is an extremely stable and high-yielding alternative to traditional stablecoins, attracting institutional and retail users. As the trend of tokenized real-world assets in DeFi continues, so does BUIDL’s potential to become a reserve asset for stablecoins, unlocking new liquidity and yield possibilities across the crypto space.
The given proposal is being closely perused and awaits community confirmation. So, integrating BUIDL into the Frax USD will redefine the future of traditionally financed digital assets.
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