- The BUIDL token should be included as a backing for Frax’s soon-to-be relaunched Frax USD stablecoin, according to a governance proposal presented by Securitize, the broker-dealer for BlackRock’s BUIDL tokenized money market fund.
- Frax founder Sam Kazemian said that the stablecoin will have a unique mint-redeem mechanism and might also be backed by assets in Superstate-managed tokenized funds.
- Although it has not yet been put to a vote, the suggestions have received overwhelmingly positive early reaction from Frax DAO members.
If a new proposal passes its governance process, Frax Finance, the decentralized stablecoin protocol, may soon incorporate BlackRock’s BUIDL token as a reserve asset supporting its soon-to-be relaunched Frax USD stablecoin.
The Frax Finance governance proposal was written by Securitize Markets, the transfer agent and broker-dealer for the BlackRock USD Institutional Digital Liquidity Fund and its BUIDL token: “By partnering with BlackRock, Frax USD can greatly lower counterparty risk for its reserves while also offering utility, relative safety, and convenience.
Frax USD will accept the BUIDL token as a backing asset, following in the footsteps of stablecoins such as Ethena’s USDtb, if the proposal is approved. The majority of BUIDL’s assets, which total about $530 million, are short-term U.S. Treasury bills.
Early reactions from Frax Finance DAO members have been overwhelmingly encouraging, even though the proposal has not yet been put to a vote. I wholeheartedly support this suggestion since it combines the finest features of DeFi and TradFi. I have no doubt that this collaboration will influence how finance develops in the future.
The proposal comes as the core team of Frax intends to introduce Staked Frax USD (sfrxUSD) as a yield-bearing equivalent and rename its basic stablecoin to Frax USD (frxUSD), as detailed in a separate governance proposal. According to the plan, the frxUSD token will enable direct conversions into fiat money via a collaboration with Paxos and might profit from Frax Finance’s efforts to obtain access to a Master Account with the U.S. Federal Reserve.
Stablecoin tokens (USDe, USDC, and sDAI), CDPs in Fraxlend, and cash equivalent RWA assets from custodians will all support the recently improved frxUSD stablecoins. If both ideas are approved, it is still unknown what proportion of the support for frxUSD would come from the BUIDL coin.
The stablecoin’s introduction will also include a new mint-redeem mechanism. If governance permits their asset to support the foreign exchange, entities can have mint-redeem rights of the currency under our new system, known as “enshrined custodians.” If the Blackrock BUIDL proposal is approved, for instance, anyone who has undergone KYC at Blackrock will be able to mint one BUIDL, send it to the onchain contract, and receive frxUSD [in]—basically a one-to-one mint. Likewise, vice versa.
Superstate, a rival tokenized fund platform, has also written two governance ideas that might lead to the adoption of the USCC crypto-carry fund and USTB Treasury bills as support for the stablecoin by the USD. These two goods are in line with [Frax Finance’s] strategy to support $frxUSD with excellent assets that are simple to mint or redeem in order to guarantee the stablecoin’s stability and expansion. According to Superstate’s plans, Frax must contribute up to $100 million to its USTB fund and up to $20 million to its USCC fund.
[Potential] custodians are not limited to BlackRock. For RWA users, both [Superstate funds] would provide frxUSD with an additional robust mint-redeem channel.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
