As an analyst with over two decades of experience in traditional finance and digital assets, I find the recent moves by Securitize and BlackRock to integrate BUIDL into various financial systems intriguing. Having worked extensively with asset managers, stablecoins, and derivatives exchanges, I can appreciate the potential benefits that this move could bring.
As a researcher, I’ve recently been involved in a significant development: Securitize, the brokerage firm behind the tokenized BlackRock US dollar Institutional Digital Liquidity Fund (BUIDL), has put forth a proposal to enhance the Frax stablecoin system. This proposal aims to incorporate BUIDL as one of the backing collateral types for the Frax USD stablecoin.
As per the suggested enhancement plan, incorporating BUIDL as a collateral reserve asset offers potential earnings, enhanced liquidity, and transferability benefits, along with minimized counterparty risk thanks to its association with the world’s leading asset manager, BlackRock.
The addition of U.S. government securities as a reserve asset for the proposed Frax USD stablecoin is pending a community vote, prior to it being implemented (BUIDL).
Tokenized real-world assets (RWAs) are becoming increasingly sought after as securities for stablecoins and their reserves, thanks to their cost savings, swift settlement speeds, and potential to offer distinct, high-interest earning possibilities for investors.
BUIDL eyes collateral markets
In September 2024, Ethena Labs, the creators of Ethena and the makers of the USDe synthetic dollar, unveiled plans for creating a stablecoin that is backed by actual development projects (BUIDL).
The digital currency known as USDtb, which is supported by the BUIDL platform, was introduced as a distinct product from Ethena’s USDe. On December 16th, this new coin started operating and amassed around $65 million in total value locked (TVL) on its initial day of trading.
In contrast to USDe, USDtb does not employ a delta-neutral trading strategy for issuing stablecoins. Instead, it keeps its value stable by being backed 1-to-1 with cash and short-term U.S. government securities held by the BUIDL fund, which are equivalent in value to U.S. dollars.
By October 2024, BlackRock started advocating for BUIDL tokens to be accepted as security for crypto derivative trades on exchanges. It’s said that they initiated discussions with Binance, OKX, and Deribit to incorporate the tokenized fund as collateral on their systems.
Employing BUIDL as security for cryptocurrency derivative trades could potentially disrupt the monopoly held by established stablecoin providers such as Tether and Circle in terms of collateral backing for digital asset-based derivative transactions. These two companies currently have significant control over the reserves used for collateral in these types of trading activities.
By November 2024, I find myself engaged in the process of minting the yield-bearing stablecoin, deUSD, within the Elixir Protocol. This minting operation is facilitated on the Curve decentralized exchange, with BUIDL serving as the backing collateral. Furthermore, the deUSD can be exchanged with other stablecoin assets that are part of Curve’s liquidity pools.
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2024-12-23 01:16