Collateralization under stress
Frax Finance's assessment for RD-F-068 — scored yellow on the v1.7.0 rubric. The evidence below is the curator's reasoning for this score.
Evidence summary #
frxUSD collateralization ratio: ~103.7% as of July 2025 (LlamaRisk). Target >=100% CR per FIP-188. The 3.7% surplus buffer is thin. Stress scenario: if BUIDL/USTB RWA redemptions cluster simultaneously with large on-chain frxUSD sell pressure, the custodian redemption latency (1 business day) could create a short-window net-asset-value gap. On-chain DEX liquidity ($10.7M) insufficient to absorb large sells without RWA pathway. Fraxlend pairs: 75% max LTV (immutable) provides 25pp collateral headroom — adequate at current utilization. Yellow for frxUSD: 3.7% surplus + 1-business-day RWA redemption latency creates stress-scenario collateral gap risk.
Sources #
- URLLlamaRisk: frxUSD Pegkeeper Onboarding ReviewLlamaRisk frxUSD Pegkeeper review: ~103.7% CR; 3-4% surplus; redemption latency intra-business-day to next-business-dayretrieved 2026-05-17
- Chaos Labs: frxUSD Token ReviewChaos Labs frxUSD review: 1:1 backing ratio; custodian-dependent redemptions; limited open-market arbitrage for BUIDL (permissioned to qualified purchasers)retrieved 2026-05-17
- Position Health & Liquidations | Frax FinanceFraxlend docs: 75% max LTV default (immutable), 10% liquidation feeretrieved 2026-05-17
Methodology #
Determine whether under curator-defined stress scenario (top-3 collateral assets drop 50%), protocol net collateralization falls below 110%.
See the full factor methodology and distribution across all protocols →