Securitize Proposes BUIDL Token as Collateral for Frax USD Stablecoin

Securitize, the brokerage behind the tokenized BlackRock US Dollar Institutional Digital Liquidity Fund (BUIDL), has proposed adding BUIDL as collateral for the Frax USD stablecoin.

The proposal, submitted as a Frax Improvement Proposal (FIP), highlights the advantages of leveraging BUIDL, which invests in U.S. government securities, as a reserve asset.

The key benefits outlined in the proposal include yield generation opportunities, enhanced liquidity and transferability, and reduced counterparty risk due to BlackRock’s backing — the world's largest asset manager.

Proposal is Subject to a Community Vote

Notably, the inclusion of BUIDL as collateral is subject to a community vote.

Tokenized real-world assets (RWAs) like BUIDL are increasingly being adopted as collateral for stablecoins.

These assets offer cost efficiencies, quick settlement times, and unique high-yield opportunities, making them attractive in the stablecoin ecosystem.

“In addition to providing Frax USD utility, relative safety, and convenience, Frax USD can significantly reduce counterparty risk for its reserves by working with BlackRock,” the proposal read.

1/ BlackRock Frax@BlackRock, the world's largest asset manager, is proposing to become an enshrined custodian to power Frax USD $frxUSD fiat redeemability.

Read the full proposal posted by BUIDL tokenization provider @Securitize here: https://t.co/K2kzZqGR10

Learn more https://t.co/7KC79iTGNG pic.twitter.com/k3c5BdBnbv

— Frax Finance ¤¤ (@fraxfinance) December 22, 2024

Ethena Labs, the developer behind the synthetic dollar USDe, launched a separate stablecoin, USDtb, backed by the BUIDL fund in September 2024.

Unlike USDe, which relies on complex trading strategies, USDtb is overcollateralized by cash and short-term U.S. government securities, maintaining a 1:1 backing with U.S. dollars.

USDtb went live on December 16, 2024, amassing $65 million in total value locked on its first day of trading.

In parallel, BlackRock has been advocating for BUIDL's use as collateral on crypto derivatives exchanges.

The asset manager has reportedly engaged with Binance, OKX, and Deribit to incorporate BUIDL into their platforms.

This move could challenge the dominance of traditional stablecoins like Tether and Circle in collateral reserves for derivatives trading.

Additionally, BUIDL has already found use in decentralized finance (DeFi). The Elixir Protocol's deUSD stablecoin can now be minted using BUIDL as collateral on Curve Finance, allowing seamless swaps with other stablecoins in Curve's liquidity pools.

Tokenization Market Could Reach $16T by 2030

McKinsey & Company recently reported that tokenized financial assets have had a "cold start" but are still expected to grow to a $2 trillion market by 2030.

Meanwhile, a report by the Global Financial Markets Association (GFMA) and Boston Consulting Group estimates the global value of tokenized illiquid assets will reach $16 trillion by 2030.

Even more conservative estimates from Citigroup suggest that $4 trillion to $5 trillion worth of tokenized digital securities could be minted by 2030.

Recognizing this potential, major companies are making significant moves in the tokenization space.

Goldman Sachs, for instance, plans to launch three new tokenization products later this year, driven by growing client interest.

Some protocols have played a significant role in driving this growth, particularly in terms of active users.

Digital carbon market platforms like Toucan and KlimaDAO, as well as the real estate tokenization protocol Propy, have experienced substantial user growth.

It is worth noting that both public and private blockchains are witnessing the inclusion of various assets.

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