Frax Protocol Will Back frxUSD Stablecoin with BlackRock’s BUIDL Fund

The Frax community has approved a proposal to use BlackRock’s Institutional Digital Liquidity Fund (BUIDL) as collateral for its upcoming frxUSD stablecoin. 

The proposal, identified as FIP-418, received unanimous support after a six-day voting period.

The Increasing Demand for BlackRock’s BUIDL Fund

BlackRock’s BUIDL fund manages over $648 million in assets and provides yield-generating opportunities for frxUSD holders. Achieving this approval is a significant step for the Frax Protocol. 

BlackRock is the largest asset manager in the world, with over $10.4 trillion in global assets. So, being backed by its tokenized fund can potentially minimize counterparty risk for the stablecoin’s collateral.

Frax Portocol’s Proposal Receives 100% Votes to Use the BUIDL Fund. Source: Snapshot

Also, this move reflects a growing trend among stablecoin projects to introduce yield-bearing options that reward holders financially while maintaining stability.

Securitize, the brokerage firm managing the BUIDL fund, initially proposed the idea on December 22. The frxUSD stablecoin will be pegged to the US dollar at a 1:1 ratio and backed by US government securities through BUIDL.

Meanwhile, other projects have also adopted BUIDL as collateral for stablecoins. Ethena Labs launched the USDtb (USDTB) stablecoin on December 16, backed by the BUIDL fund. The asset’s current market capitalization is $70 million. 

In November, Curve Finance enabled users to mint Elixir’s deUSD (DEUSD) yield-bearing stablecoin using BUIDL as collateral.

Distribution of BlackRock’s BUIDL Fund. Source: DeFilLama

The Rise of Real-World Asset Tokenization

In late 2024, BlackRock expanded BUIDL to five major blockchains. This included Aptos, Arbitrum, Avalanche, Optimism, and Polygon. 

These developments align with BlackRock’s broader digital asset strategy, which includes initiatives like the IBIT Bitcoin ETF and tokenized funds. 

Overall, the adoption of tokenized real-world assets (RWAs) continues to grow. In 2024, several major players achieved milestones in this area, setting the stage for further developments in 2025. 

For example, Tether plans to roll out its Hadron RWA tokenization platform by February. This will offer institutional investors direct access via APIs. 

Also, Hedera has integrated Chainlink Data Feeds and Proof of Reserve mechanisms to enhance its DeFi and RWA capabilities.

RWA Tokenization Global Market Overview. Source: RWA.XYZ

In short, the Frax community’s decision to integrate BlackRock’s BUIDL fund into its stablecoin highlights the increasing overlap between traditional finance and blockchain-based innovations. 

This shift reflects the potential for real-world asset tokenization to transform the stablecoin industry.