Key Notes
- Frax Finance’s frxUSD will now be backed by the BlackRock BUIDL Fund.
- The DeFi project aims to bridge DeFi and CeFi with the frxUSD stablecoin.
- The number of stablecoin issuers is growing, with RLUSD joining the trend.
Frax Finance, a well-known Decentralized Finance (DeFi) protocol, is breaking new ground in the stablecoin market by combining blockchain technology with traditional finance through its frxUSD stablecoin backed by BlackRock’s BUIDL tokenized money market fund, as reported by The Block.
BlackRock’s BUIDL Token: A Cornerstone for Stability
BlackRock’s BUIDL token, a digital version of a money market fund, is central to this breakthrough. Managed by the world’s largest asset manager, the fund invests in high-quality assets like the US Treasury bills and cash, offering unmatched trust and stability.
By using BUIDL to back its frxUSD stablecoin, Frax Finance sets a new standard for security and liquidity in crypto. In a statement, Frax Finance founder Sam Kazemian highlighted the significance of this partnership.
He emphasized that frxUSD combines blockchain transparency with BlackRock’s top-tier treasury assets, with the partnership facilitated quickly by Securitize, the broker-dealer for BlackRock’s BUIDL token, who drafted and submitted a governance proposal to Frax’s Decentralized Autonomous Organization (DAO) that received strong support and quick approval, showing the DAO’s confidence in the plan.
Frax announced that BUIDL will now serve as a key reserve asset for creating and redeeming frxUSD. This makes it a stable and trusted foundation for the token. Additionally, Ethena’s USDtb stablecoin is also backed by BlackRock’s BUIDL fund, facilitated by Securitize
Frax Finance frxUSD: A Bridge Between DeFi and Traditional Finance
The frxUSD stablecoin aims to offer seamless on-chain and off-chain usability. Through a partnership with Paxos, frxUSD holders can directly convert the token into fiat currency. It would make it more accessible to everyday users and institutional players alike.
This feature supports Frax’s larger goal of gaining access to the US Federal Reserve Master Account. Achieving this would strengthen frxUSD’s position as a functional stablecoin. Frax Finance chose BlackRock’s BUIDL token as the backing for its frxUSD stablecoin for a clear reason: reliability and trust.
This decision was not random. It reflects Frax’s goal to create a stablecoin that earns both the confidence of DeFi and traditional finance users. Using BUIDL, Frax connects two financial worlds, paving the way for a new generation of stablecoins.
As other projects like Ethena (ENA) gain traction, the success of frxUSD could lead to more partnerships that connect blockchain and traditional finance.
Following Ripple’s approach to DeFi integration with traditional finance, the company launched RLUSD stablecoin in 2024, a token pegged to the US dollar and backed by government bonds, USD deposits, and cash equivalents, while continuing to push tokenization initiatives through both RLUSD and its L1 protocol XRP Ledger.
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Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
