Securitize proposes adding BUIDL as a backing asset for Frax USD Stablecoin.

by
Alyssa Davidson

Posted: December 23, 2024 3:25 AM Updated: December 23, 2024 3:25 AM

by well

Correction and fact check date: December 23, 2024, 3:25 AM

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Tokenization platform Securitize has announced a new offering to provide exposure to US dollar yields by introducing the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) as an on-chain backing asset for Frax USD.

BUIDL is a tokenized U.S. Treasury product designed to provide decentralized organizations and institutional investors with blockchain-based investment solutions that can serve as reserve support for stable assets along with other investments. Among the key benefits are yield generation, a variety of transfer options, and minimal counterparty risk thanks to the participation of industry leaders such as Securitize, BlackRock, and Bank of New York Mellon.

Tokenized Real Assets (RWA) serve as an effective bridge between traditional finance and decentralized organizations by bringing institutional-level investments to the blockchain. Over the past nine months, major players, including decentralized autonomous organizations (DAOs) and protocols, have issued public requests for proposals (RFPs) to explore how RWAs can strengthen their finances or support stablecoins. These initial efforts represent a shift in the way distributed enterprises manage their financial resources and consider cross-industry asset strategies. It also lays the foundation for exploring strategies such as asset diversification, return optimization, and portfolio risk management.

BUIDL, a high-quality tokenized RWA, is quickly becoming an essential component of reserve assets across the stable value token industry. In addition to enhancing the usability, safety, and convenience of Frax USD, Frax USD can reduce counterparty risk through its partnership with BlackRock, the world’s largest asset manager overseeing $849 billion in cash-related products as of September 2024.

The proposal states that BUIDL plans to allocate 100% of its total assets to cash, U.S. Treasury bonds, notes and other obligations issued or guaranteed by the U.S. Treasury for principal and interest. It also includes repurchase agreements collateralized by such obligations or cash, providing investors with exposure to one of the most liquid assets. The fund aims to maintain a stable value of $1 per token, with holders potentially earning returns through daily cumulative dividends issued as new tokens to investors’ wallets each month.

BUIDL, an ERC-20 token, can be held by any provider on the Ethereum public blockchain. It is also available natively on networks such as Polygon, Avalanche, Optimism, Arbitrum, and Aptos.

Current assets under management (AUM) of all integrated chains can be viewed on platforms such as Dune or RWA.xyz. As of December 2024, total AUM across the chain is $561,536,881. BUIDL also processed 620 transactions totaling $1.38 billion as of the same date.

What is securitization?

As a leader in RWA tokenization, Securitize plays a key role in the continued evolution of the financial sector by bringing traditional assets on-chain. The platform partners with respected asset managers such as BlackRock, Hamilton Lane, KKR, etc. to tokenize funds. Securitize is the exclusive tokenization platform for funds and serves as transfer agent and placement agent for BUIDL through Securitize Markets, a registered broker-dealer.

By July 2024, it had facilitated over $1 billion worth of investments in tokenized securities on its platform, oversaw the issuance of over 100 tokenized securities and managed over 500,000 investor accounts. The company has also raised more than $170 million from a combination of traditional financial institutions and blockchain industry leaders.