The Defiant

Frax Votes To Move $20M Of Stablecoin Collateral Into Treasury Bills

Stablecoin protocol leverages Centrifuge Prime, a service that provides the infrastructure for DAOs to invest in real-world assets.

By: Owen Fernau Loading...

Frax Votes To Move $20M Of Stablecoin Collateral Into Treasury Bills

While Bitcoin Ordinals and memecoins on Solana have been dominating headlines, the trend of tokenizing non-crypto assets shows no sign of slowing down.

The community behind Frax Finance, the multifaceted stablecoin protocol, has voted to deploy $20M of its collateral into U.S. Treasuries.

Frax is leveraging an offering from Centrifuge, a company which has emerged as a leader in the real world asset (RWA) space this year. The collateral backs Frax’s stablecoins, the most prominent of which is FRAX, a U.S. dollar-pegged asset with a $648M market capitalization.

“They’re effectively taking some of their stablecoin collateral and replacing it with T-bills,” Lucas Vogelsang, the founder of Centrifuge, told The Defiant.

Frax will be deploying the assets through Centrifuge Prime, a product which offers off-the-shelf solutions for DAOs looking to diversify their war chests. Prime provides the technical, legal, and financial infrastructure for DAOs to invest in RWAs.

Centrifuge Prime Structure
Centrifuge Prime Structure

Vogelsang sees Prime as filling a key need for DAOs beyond just exposure to U.S. treasuries. “[DAOs] need help in their governance processes,” he said. “They need transparent reporting that the whole DAO can see, they need the legal structure.”

With benchmark interest rates in the U.S. at their highest level since 2001, Treasuries have attracted significant interest in crypto. The latest vote by Frax’s DAO shows the continued demand from crypto projects to diversify their holdings beyond crypto assets.

Current DeFi yields are generally lower than those offered by traditional financial products, pushing DAOs to explore RWA solutions. “Because Treasury bill interest rates shot up so much, the most attractive thing to do is take your stablecoins and turn them into tokenized T-bills,” Vogelsang said.

MakerDAO, the collateralized lending platform, made a major move last year when it deployed $500M into Treasuries and corporate bonds. Other projects like Ondo Finance shook up the space further by offering tokenized Treasuries earlier this year.

The total value of tokenized Treasuries is $775.4M as of Dec. 19.

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Tokenized Treasury Sector TVL
Tokenized Treasury Sector TVL

This isn’t Centrifuge’s first time helping a prominent DAO allocate its resources — the project provided a similar framework to enable MakerDAO to deploy over $1B in capital, noted the Frax proposal.

Looking forward, Vogelsang said that Centrifuge recently launched on Arbitrum, the leading Layer 2 scaling solution for Ethereum, and that the project’s DAO is looking to diversify its treasury into RWAs. “That’s definitely an interesting project that we’re looking at, along with many other DAOs, of course,” he said.

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