Frax Finance has officially launched its new stablecoin, frxUSD, in partnership with BlackRock’s BUIDL fund, bridging the worlds of traditional finance and decentralized blockchain ecosystems. This collaboration promises a stable, yield-bearing asset backed by BlackRock’s $648 million tokenized liquidity fund, which aims to provide both stability and enhanced returns for frxUSD holders.
frxUSD: A New Era of Stablecoin Integration
The launch of frxUSD follows the passage of governance proposal FIP-418 by the Frax community, which paved the way for BlackRock’s United States Dollar Institutional Digital Liquidity Fund (BUIDL) to serve as the collateral backing the new stablecoin. The proposal, which received full support from the Decentralized Autonomous Organization (DAO), was approved after a six-day voting period.
BlackRock’s BUIDL fund, which invests in liquid instruments such as cash, U.S. Treasury bills, and repurchase agreements, will act as the custodian for the creation of frxUSD. According to Frax Finance founder Sam Kazemian, “frxUSD is a bridge between the blockchain world with its openness and programmability and BlackRock’s prime treasury products with their credibility.”
The BUIDL fund is designed to minimize counterparty risk while maximizing yield for frxUSD holders, making it an appealing option for those seeking stability and growth in the growing landscape of tokenized real-world assets (RWAs).
Key Features of frxUSD Stablecoin
frxUSD is pegged to the U.S. dollar on a 1:1 ratio, ensuring price stability for its users. To further enhance liquidity, Frax Finance has partnered with Paxos to enable direct fiat conversion of frxUSD. Additionally, holders of frxUSD will receive a share of the yield generated from the underlying assets within the tokenized fund, providing an added benefit for investors.
As part of its broader strategy, Frax Finance has also revealed plans to apply for access to the U.S. Federal Reserve Master Account, which would allow frxUSD to operate within regulated markets, further solidifying its potential in the global financial ecosystem.
A Growing Trend of BUIDL-Backed Stablecoins
frxUSD is not the only stablecoin to be backed by BlackRock’s BUIDL fund. In December 2024, Ethena Labs launched USDtb, a stablecoin with a market cap of $70 million, also pegged to BUIDL. The goal of USDtb is to offer a more stable alternative to synthetic dollar-backed tokens, particularly in volatile market conditions. Similarly, Curve Finance has integrated BUIDL as collateral for minting Elixir’s deUSD stablecoin, further highlighting the growing trend of using tokenized funds for collateral in stablecoin markets.
Timing and Institutional Involvement
The launch of frxUSD comes at a pivotal moment, as the stablecoin market undergoes significant regulatory transformations. The European Union’s Markets in Crypto-Assets (MiCA) regulation, which came into full effect on December 30, 2024, is expected to set new standards for stablecoin issuers and further shape the industry.
BlackRock’s involvement in the tokenized asset space signals the increasing acceptance of digital finance by traditional institutions. With over $10.4 trillion in assets under management, BlackRock’s participation is seen as a major step toward broader institutional adoption of blockchain-based financial products, including Bitcoin ETFs, and could pave the way for more traditional financial institutions to engage with Web3 technologies.
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