Frax Finance Seeks Approval for BlackRock’s USD Institutional Digital Liquidity Fund as Reserve Asset

Decentralized finance protocol Frax Finance is preparing to launch its new stablecoin, Frax USD (frxUSD), and is seeking the approval of its community to onboard BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) as a reserve asset.

The Proposal and Voting Process

The voting period, which runs from December 27 to January 1, 2025, will determine whether the partnership with BlackRock will proceed. Frax Finance has shared a proposal outlining the features, benefits, and background of BUIDL, which will function as an on-chain backing asset for Frax USD.

“The vote to onboard Blackrock $BUIDL as the first backing asset for the new Frax USD (frxUSD) stablecoin is live!”

Frax Finance announced on December 23 that BlackRock, the leading asset management firm, had proposed to become the custodian backing Frax USD.

Understanding BUIDL

BUIDL is a tokenized product that invests in government-issued assets, such as cash, U.S. Treasury bills, repurchased agreements, notes, and other obligations. It is promoted as a “blockchain-based investment solution” that can be used as a reserve backing for stable assets.

The benefits of holding BUIDL as a reserve backing asset include:

  • Generating yield opportunities
  • Strengthening liquidity
  • Providing multiple transfer options
  • Minimizing external risk with the aid of major financial firms such as Securitize, BlackRock, and Bank of New York Mellon

“By working with Securitize and BlackRock to use BUIDL as a backing asset for Frax USD, Frax USD will gain exposure to one of the most liquid assets in the world, while still reaping the benefits of yield-bearing, on-chain efficiencies of DeFi,”

According to Nader Ghazvini, Head of Governance at Frax Finance.

BUIDL’s Performance

In July 2024, BlackRock’s tokenized treasury fund BUIDL gained more than $500 million in assets under management after its launch in April this year. BUIDL’s price is pegged to the U.S. dollar, and investors receive daily accrued dividends paid directly on a monthly basis through its partnership with Securitize.

For more news on stablecoins, decentralized finance, and cryptocurrency investing, visit Global Crypto News.

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