Binance launches BFUSD, promises APY will “never go below zero”
The world’s largest cryptocurrency exchange Binance officially introduced BFUSD on Tuesday, a “reward-earning margin asset” that allows users to earn passive rewards by holding or trading futures with it, with the product set to launch on Wednesday (Asian time).
“BFUSD is designed as a margin asset for futures trading while also offering passive rewards,” a Binance spokesperson told The Block. “BFUSD holders will enjoy a base APY [annual percentage yield] that accrues daily even if they do not trade futures, and those with qualifying USDⓈ-margined futures trading activity will enjoy a higher enhanced APY for that day.”
The Binance spokesperson claimed that based on recent historical data, the base APY for BFUSD has ranged from around 12% to over 35% during the period from November 20 to 25. Furthermore, the enhanced APY is said to have reached between about 15% and over 47% during that time. However, it is worth noting that BFUSD is scheduled to begin trading on November 27 at 02:00 UTC, at which point eligible users can begin purchasing it. These figures have not been independently verified.
BFUSD is not a stablecoin
The Binance spokesperson said that BFUSD is “not a stablecoin” because it cannot be withdrawn from a Binance futures account or traded on the open market. “It can only be used as margin for futures trading on Binance and redeemed with Binance for the USDT stablecoin,” they said.
BFUSD generates returns through two strategies: delta hedging crypto assets between spot and futures markets to collect funding fees and ether staking.
The structure of BFUSD may seem similar to that of Ethena's "synthetic dollar" USDe, which also uses delta hedging to provide rewards.