Securitize proposes BlackRock BUIDL fund as collateral for Frax USD

Securitize, the brokerage firm for the tokenized BlackRock US dollar Institutional Digital Liquidity Fund (BUIDL), has submitted a Frax improvement proposal to add BUIDL as backing collateral for the Frax USD stablecoin.

According to the improvement proposal, using BUIDL as a collateral reserve asset provides yield opportunities, deeper liquidity and transfer options, and reduced counter-party risk due to the backing of the world's largest asset manager, BlackRock.

The proposal is still subject to a community vote before BUIDL — which invests in United States government securities — is added as a reserve asset for the proposed Frax USD stablecoin.

Tokenized real-world assets (RWAs) are gaining popularity as collateral-backing and reserve assets for stablecoins due to cost efficiencies, fast finality times, and the potential to introduce unique, high-yield bearing opportunities for holders.

BUIDL statistics and metrics. Source: RWA.XYZ

Related: Optimism high for Ethena’s USDtb stablecoin as it clocks $65M TVL on day 1

BUIDL eyes collateral markets

Ethena Labs — the developer behind Ethena, responsible for the USDe synthetic dollar — announced the development of a BUIDL-backed stablecoin in September 2024.

The BUIDL-backed stablecoin, dubbed USDtb, is a separate product offering from Ethena's USDe. USDtb went live on Dec. 16 and accrued approximately $65 million in total value locked (TVL) on its first trading day.

Unlike USDe, which relies on a complex delta-neutral trading strategy to issue stablecoins, USDtb is overcollateralized by cash and short-term US government securities held by the BUIDL fund at a 1:1 ratio with US dollars.

In Oct. 2024, BlackRock began pushing for BUIDL as collateral on crypto derivatives exchanges. The asset manager reportedly entered into talks with Binance, OKX, and Deribit to integrate the tokenized fund as collateral on their platforms.

Integrating BUIDL as collateral for crypto derivatives trading would challenge the dominance of incumbent stablecoin issuers like Tether and Circle, which currently dominate collateral reserves for digital asset derivatives trading.

As of November 2024, the Elixir Protocol's deUSD yield-bearing stablecoin can be minted on the Curve decentralized exchange using BUIDL as backing collateral and is exchangeable with other stablecoin assets in Curve's liquidity pools.

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