Decentralised cryptocurrency protocol stablecoin Frax Finance has launched a new stablecoin, frxUSD, which will run on BlackRock's USD institutional Digital Liquidity Fund (BUIDL).

With the partnership, Frax Finance seeks to offer a secure, transparent and verifiable backing mechanism to further connect traditional finance with decentralised systems.

Stablecoin frxUSD is a rebranded evolution of Frax's flagship stablecoin FRAX, which aims to offer direct fiat redemption capabilities and greater compliance with US financial systems.

Launched by BlackRock in March 2024, BUIDL is the investor’s first tokeniszed fund on the Ethereum network and forms part of its broader digital asset strategy.

As part of the collaboration, BUIDL will become a custodian asset for the minting and redemption of frxUSD.

The stablecoin will be backed by assets held in BlackRock's BUIDL to ensure transparency and audibility on the chain, with frxUSD offering on and off-ramping capabilities of fiat through Blackrock's BUIDL infrastructure, Frax Finance said in a statement.

BUIDL is designed to offer qualified investors the opportunity to earn US dollar returns by subscribing through Securitize Markets, a digital marketplace operated by real-world asset tokenisation platform Securitize that provides solutions for asset managers, Web3 companies, advisors and investors.

On Securitize Markets, investors can access and invest in tokenised private market funds. This platform enables the trading of digital securities, providing liquidity and wider access to alternative investments.

BUIDL currently invests in cash, US treasury bills, and repurchase agreements, aiming to maintain a stable value of $1 per token. Investors receive daily accrued dividends directly to their wallets as new tokens each month.

Carlos Domingo, co-founder and chief executive officer of Securitize, emphasised how tokenised real-world assets provide a bridge between traditional finance and decentralised finance.

"This collaboration exemplifies the next stage in financial evolution, demonstrating how traditional and decentralised systems can work together to redefine asset management strategies,” he said.

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