[TEMP CHECK] Onboard frxUSD to Aave v3 Ethereum Core Instance

Governance New Asset
1

Title: [TEMP CHECK] Onboard frxUSD to Aave v3 Ethereum Core Instance

Author: Frax Core Team

Date: 2025-09-16

Simple Summary

This proposal seeks to onboard Frax USD (frxUSD) as a new stablecoin asset on the Aave v3 Ethereum Core Instance. frxUSD is fully backed by tokenized U.S. Treasury assets held by top-tier institutions like BlackRock and Superstate and is redeemable 1:1 for USD through enshrined custodians.

Motivation/Background

About frxUSD

frxUSD is a fiat-redeemable stablecoin issued by the Frax Protocol, fully backed 1:1 by tokenized U.S. Treasury funds managed by institutional custodians like BlackRock and Superstate. Its bankruptcy-remote structure ensures unparalleled stability, and it is mintable/redeemable directly through licensed partners and soon directly on the frax.com interface itself to any user in the world (fiat wires will require KYC/AML). frxUSD is mintable/redeemable 1:1 for cash, USDC, and USDT directly from the issuer, Frax Protocol. Additionally, frxUSD offers a unique revenue-sharing mechanism, allowing up to 100% of its underlying T-Bill yield (currently 4.1%) on unborrowed frxUSD assets in Aave pools to be shared with Aave DAO. This revenue can be utilized as protocol income or distributed as incentives for depositors, providing flexibility for governance decisions.

Benefits of Listing frxUSD

Adding frxUSD to Aave v3 on the Ethereum Core Instance would provide the following benefits:

  • Stable Collateral Base: Institutional-grade reserves reduce protocol risk.

  • Guaranteed Incentives: 100% of T-Bill yield (4.1% APY) from unborrowed frxUSD assets deposited in Aave pools would be used as incentive for participants.

  • Regulatory Compliance: Positioned as a payment stablecoin under the GENIUS Act.

Proof of Liquidity and Deposit Commitments

Frax Finance commits to supporting the launch of frxUSD on Aave v3 Ethereum with meaningful liquidity:

  • Initial Liquidity Commitment: At least $1M+ in frxUSD deposits will be provided to Aave within the first month of deployment, ensuring strong utilization and borrow availability from day one.

  • Engaged LP Community: Frax has an active community of liquidity providers who have expressed strong demand for frxUSD on Aave Ethereum. Many are recurring participants in lending markets and are expected to migrate capital into this market upon launch.

  • Sustainable Incentive Model: frxUSD’s underlying RWA yield (from tokenized U.S. Treasuries) enables sustainable protocol incentives. portion or full reward from unborrowed frxUSD held in Aave pools can be directed toward depositors. This aligns long-term usage incentives with real-world income rather than relying on token emissions.

Specifications

frxUSD Token Contract Address:

Ethereum: 0xCAcd6fd266aF91b8AeD52aCCc382b4e165586E29

Chain: Ethereum

We are open for recommendations from Aave risk management teams.

Useful Links

Next Steps

  1. Publication of TEMP CHECK to gather community & service providers feedback, and escalate to TEMP CHECK Snapshot.
  2. Publication of a standard ARFC, if TEMP CHECK Snapshot passed, to continue collecting community & service provider feedback before escalating proposal to ARFC snapshot stage.
  3. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.

Copyright

Copyright and related rights waived under CC0.