Vote on BlackRock's BUIDL as reserve asset for Frax USD begins

The Frax Finance community has initiated a vote to adopt BlackRock's USD Institutional Digital Liquidity Fund (CRYPTO:BUIDL), known as BUIDL, as a reserve asset for the proposed stablecoin Frax USD (frxUSD). 

Voting commenced on December 26 and will remain open until January 1, 2025. 

So far, all votes cast have supported the proposal, with community discussions reflecting a consensus in favor.

The integration of BUIDL aims to enhance the stability and liquidity of Frax USD while reducing counterparty risks associated with stablecoin backing.

According to the proposal summary, adopting BUIDL could create yield opportunities and improve transfer options for users. 

The discussion surrounding this proposal was initially prompted by Securitize, the broker-dealer for BlackRock’s BUIDL. 

A user identified as achaffee noted that tokenised real-world assets (RWAs) “provide an excellent bridge” between traditional finance and decentralised finance (DeFi). 

They emphasised that the recent interest from decentralised organisations in tokenising RWAs marks a significant evolution in financial management strategies.

BUIDL has quickly garnered attention since its launch on March 15, achieving over $500 million in assets under management (AUM) within four months. 

The fund is designed to maintain a stable value of $1 per token while investing primarily in U.S. government securities. 

Token holders receive daily accrued dividends distributed monthly through a partnership with Securitize.

Frax is not alone in exploring BUIDL-backed stablecoins; Ethena Labs has already launched a similar product called USDtb, which went live on December 16 and has accrued $89 million in total value locked.

As the vote progresses, the potential adoption of BUIDL as a backing asset for Frax USD could reshape how decentralised protocols manage their reserves and enhance their operational capabilities in the evolving DeFi landscape.