Frax Finance Launches New Stablecoin Backed by BlackRock's BUIDL Fund

The frxUSD stablecoin is a rebranded evolution of the company's flagship FRAX stablecoin and will leverage BlackRock's USD Institutional Digital Liquidity Fund

Frax Finance, a decentralized stablecoin cryptocurrency protocol, has announced the launch of a new stablecoin that offers "unprecedented" transparency and custody, according to a press release on Thursday (Jan. 2).

The frxUSD stablecoin is a rebranded evolution of the company’s flagship FRAX stablecoin. It will leverage BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which will be tokenized by Securitize.

The new stablecoin provides direct fiat redemption capabilities and enhanced compliance with U.S. financial systems, the press release states.

“By partnering with Securitize to access and leverage BlackRock’s BUIDL Fund we are setting a new standard for stablecoins,” Frax Finance Founder Sam Kazemian said in the press release. “frxUSD combines the transparency and programmability of blockchain technology with the trust and stability of BlackRock’s prime treasury offerings.”

In this new collaboration around the stablecoin, BUIDL will become an enshrined custodian asset for minting and redeeming frxUSD. The stablecoin will be backed by cash, U.S. Treasury bills and repurchase agreements that are held in BUIDL, and frxUSD will offer seamless fiat on/off-ramping capabilities via the BUIDL infrastructure, according to the press release.

“Tokenized real-world assets provide an excellent bridge between traditional finance and decentralized finance, bringing institutional-grade investments on-chain with unprecedented transparency and efficiency,” Securitize Co-Founder and CEO Carlos Domingo said in the press release. “This collaboration exemplifies the next stage in financial evolution, demonstrating how traditional and decentralized systems can work together to redefine asset management strategies.”

Stablecoins are emerging as a powerful tool bridging the gap between traditional financial technology and the world of cryptocurrencies, PYMNTS reported in October.

As cryptocurrencies designed to maintain a stable value by being pegged to a reserve asset (usually a fiat currency like the U.S. dollar or the euro), stablecoins are able to offer the efficiency and transparency of blockchain technology while providing the familiarity and stability of fiat currencies.

In another, separate development, it was reported Thursday that stablecoin leader Tether has seen its market value decline amid new European Union (EU) cryptocurrency rules, with the company’s USDT having its sharpest weekly drop in two years.

USDT had reached a record market value in mid-December but declined after several EU-based exchanges and Coinbase removed the stablecoin due to compliance issues with the EU’s Markets in Crypto-Assets (MiCA) regulation that took full effect on Dec. 30.