The Frax community has approved the proposal FIP-418, which allows the stablecoin frxUSD to be backed by BlackRock's United States dollar Institutional Digital Liquidity Fund (BUIDL).
The Frax community has approved a proposal (FIP-418) to permit the stablecoin frxUSD to be backed by BlackRock’s United States dollar Institutional Digital Liquidity Fund (BUIDL). This decision was made following a six-day voting period, during which the proposal was passed unanimously.
The use of BUIDL as collateral is set to present yield-bearing opportunities for frxUSD holders. At the same time, it aims to minimize counterparty risk, considering BlackRock's substantial asset management portfolio, valued at over $10.4 trillion.
Frax Finance founder Sam Kazemian highlighted the synergy between blockchain technology and BlackRock's financial stability. He noted that this collaboration marks a pivotal step toward integrating traditional finance with decentralized systems. This initiative aligns with a broader trend to develop stablecoins that not only maintain value but also reward holders with financial benefits.
Securitize, the brokerage firm that manages the BUIDL fund, initially suggested using BUIDL as collateral for frxUSD last December. The stablecoin is pegged to the US dollar on a 1:1 basis and is backed by US government securities.
In related developments, Ethena Labs announced the BUIDL-backed stablecoin USDtb, designed to stabilize synthetic dollars during market volatility. Furthermore, decentralized exchange Curve Finance will allow users to mint Elixir's yield-bearing stablecoin DEUSD using BUIDL as collateral, starting in November 2024.
Industry experts, such as WeFi co-founder Reeve Collins, anticipate growing demand for yield-bearing stable assets, supported by advancements in technology and artificial intelligence. This evolution indicates an increasing shift among investors from traditional stablecoins to those offering accrued interest.
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