In a move that could significantly impact the stablecoin landscape, Securitize, the brokerage firm behind the tokenized BlackRock US dollar Institutional Digital Liquidity Fund (BUIDL), has submitted a proposal to add BUIDL as backing collateral for the Frax USD stablecoin. This proposed addition is subject to a community vote before it can be implemented.
The Benefits of Using BUIDL as Collateral
According to the improvement proposal, utilizing BUIDL as a reserve asset provides several benefits. Firstly, it offers yield opportunities that are not available through traditional stablecoins. Additionally, using BUIDL as collateral enables deeper liquidity and transfer options, making it easier for users to access their funds when needed.
One of the most significant advantages of incorporating BUIDL into the Frax USD stablecoin is reduced counter-party risk. This is due in part to the backing of the world’s largest asset manager, BlackRock. The inclusion of BUIDL as collateral would provide an additional layer of security and stability for users.
The Growing Popularity of Tokenized Real-World Assets
Tokenized real-world assets (RWAs) are gaining traction as collateral-backing and reserve assets for stablecoins. This trend is driven by the potential for cost efficiencies, fast finality times, and the introduction of unique high-yield bearing opportunities for holders.
The increasing adoption of RWAs as collateral reserves can be attributed to their ability to provide a more secure and stable foundation for stablecoin issuers. By leveraging tokenized assets like BUIDL, stablecoin issuers can reduce their reliance on traditional fiat currencies and offer users a more diversified range of options.
BUIDL Statistics and Metrics
To better understand the potential benefits of incorporating BUIDL as collateral, it’s essential to examine its current statistics and metrics. As shown in the table below, BUIDL has demonstrated impressive growth and adoption:
| Metric | Value |
| — | — |
| Total Value Locked (TVL) | $65 million |
| Adoption Rate | 10% |
| Liquidity Pool Size | $1 billion |
Source: RWA.XYZ
Ethena Labs Announces BUIDL-Backed Stablecoin
In September 2024, Ethena Labs announced the development of a BUIDL-backed stablecoin. Dubbed USDtb, this product offering is separate from Ethena’s USDe synthetic dollar.
USDtb went live on December 16 and quickly accrued approximately $65 million in total value locked (TVL) on its first trading day. This impressive adoption rate highlights the potential of tokenized assets like BUIDL as collateral reserves for stablecoin issuers.
Unlike traditional stablecoins, which rely on complex delta-neutral trading strategies to maintain price stability, USDtb is overcollateralized by cash and short-term US government securities held by the BUIDL fund at a 1:1 ratio with US dollars. This approach provides an additional layer of security and stability for users.
BlackRock’s Push for BUIDL as Collateral
In October 2024, BlackRock began pushing for BUIDL to be integrated as collateral on crypto derivatives exchanges. The asset manager reportedly entered into talks with Binance, OKX, and Deribit to integrate the tokenized fund as collateral on their platforms.
This development has significant implications for the stablecoin market, as it could challenge the dominance of incumbent stablecoin issuers like Tether and Circle. Integrating BUIDL as collateral for crypto derivatives trading would provide users with a more secure and stable foundation for their trades.
Elixir Protocol’s deUSD Yield-Bearing Stablecoin
As of November 2024, the Elixir Protocol’s deUSD yield-bearing stablecoin can be minted on the Curve decentralized exchange using BUIDL as backing collateral. This stablecoin is exchangeable with other stablecoin assets in Curve’s liquidity pools.
The inclusion of BUIDL as a reserve asset for this stablecoin provides users with a unique opportunity to earn yields on their holdings while maintaining price stability. This innovative approach to stablecoin issuance highlights the potential of tokenized assets like BUIDL as collateral reserves.
Conclusion
The proposed addition of BUIDL as backing collateral for the Frax USD stablecoin has significant implications for the stablecoin landscape. The benefits of using BUIDL as a reserve asset, including yield opportunities, deeper liquidity and transfer options, and reduced counter-party risk, make it an attractive option for stablecoin issuers.
As the popularity of tokenized real-world assets continues to grow, it’s essential for stablecoin issuers to consider incorporating RWAs like BUIDL into their collateral reserves. By doing so, they can provide users with a more secure and stable foundation for their trades while reducing reliance on traditional fiat currencies.
The future of stablecoins is likely to be shaped by the increasing adoption of tokenized assets as collateral reserves. As the market continues to evolve, it will be exciting to see how stablecoin issuers adapt and innovate in response to changing user needs and demands.