Frax community approves frxUSD backed by BlackRock fund

The Frax (CRYPTO:FRAX) community has voted unanimously to approve FIP-418, enabling BlackRock's USD Institutional Digital Liquidity Fund (BUIDL) to serve as collateral for the Frax-USD (frxUSD) stablecoin.

The decision marks a significant move toward integrating traditional finance assets into decentralised financial systems.

BUIDL, a tokenised fund backed by U.S. government securities, offers potential yield-bearing opportunities for frxUSD holders while minimising counterparty risk.

BlackRock, the world's largest asset manager, manages over $10.4 trillion in assets, with the BUIDL fund alone overseeing more than $648 million, according to RWA.xyz.

“FrxUSD combines the transparency and programmability of blockchain technology with the trust and stability of BlackRock’s prime treasury offerings. This collaboration is a significant step toward bridging traditional finance with decentralised systems,” stated Frax Finance founder Sam Kazemian highlighting the importance of the collaboration.

The move is part of a growing trend toward creating yield-bearing stablecoins, which provide financial rewards alongside stability.

Securitise, the brokerage firm managing BUIDL, proposed its use as collateral on December 22.

The frxUSD stablecoin, pegged 1:1 to the U.S. dollar, is expected to provide stable returns backed by real-world assets.

Other projects have also explored similar avenues.

In September, Ethena Labs announced its own BUIDL-backed stablecoin, USDtb, to stabilise synthetic dollars during market downturns.

Decentralised exchange Curve Finance introduced deUSD, another yield-bearing stablecoin collateralised by BUIDL, in November 2024.

WeFi co-founder Reeve Collins noted that yield-bearing stablecoins are gaining popularity as investors seek alternatives to traditional stablecoins that do not generate interest.

Collins predicted this trend will grow with advances in agentic AI and account abstraction, which simplify mechanisms for accruing yields.

At the time of reporting, the Frax (FRAX) price was $0.9951.