Securitize, a brokerage firm that manages BlackRock’s tokenized US Dollar Institutional Digital Liquidity Fund (BUIDL), has proposed utilizing BUIDL as collateral for the Frax USD stablecoin. Securitize submitted the proposal as a Frax Improvement Proposal (FIP), emphasizing BUIDL’s potential to enhance liquidity, generate yield, and enhance overall security for Frax USD, a stablecoin with the potential to transform the digital asset landscape.
The proposal underlines BUIDL’s significant support from US government securities, as well as its relationship with BlackRock, the world’s largest asset manager. According to Securitize, using BUIDL as a reserve asset provides cost savings, faster transaction times, and higher yield potential for investors. However, before implementation, the community must approve the plan in a governance vote.
This is not BUIDL’s first venture into the collateral market. BUIDL presented itself as the backing for Ethena’s USDtb stablecoin in December 2024, overcollateralized 1:1 with cash and US Treasury securities. USDtb generated $65 million in total value locked (TVL) on its first day of trading.
BlackRock has also been looking into broader applications for BUIDL in crypto derivatives markets. The company has partnered with key platforms including Binance, OKX, and Deribit to use BUIDL as collateral for derivatives trading. If this approach proves successful, it could potentially challenge the dominance of traditional stablecoins like Tether and USDC in these markets.
BUIDL has already made significant progress in decentralized finance (DeFi). The Elixir Protocol allows users to mint their DEUSD stablecoin on Curve Finance with BUIDL as collateral. This allows for frictionless swaps with other stablecoins, which increases its utility in the DeFi ecosystem.
The increased interest in tokenized real-world assets (RWAs), such as BUIDL, indicates their increasing importance in the financial sector. These assets have a unique combination of efficiency and profitability, making them excellent candidates for stablecoin backing. We expect innovations like these to play a significant role in shaping the future of the digital asset field as it evolves.
