The world's largest cryptocurrency exchange Binance has launched a new asset BFUSD, sparking speculation that the asset might be a high-yield stablecoin. However, Binance quickly clarified the misunderstanding, stating that although BFUSD includes 'USD' in its name and has an annual percentage yield (APY) of up to 19.55%, it is not a stablecoin.
What is BFUSD? A new margin asset
On Monday, Binance announced the launch of BFUSD, describing it as a 'yield-bearing futures trading margin asset.' Binance emphasized that BFUSD has not officially launched and is different from traditional stablecoins. Binance denied the claim that BFUSD is a stablecoin.
'BFUSD is not a stablecoin but a yield-bearing margin asset for futures trading.' Binance added that BFUSD will offer high yields but did not explain the specific workings of these returns.
High yield: Comparison with TerraLUNA
The 19.55% annual yield has attracted the attention of the crypto community, with some comparing BFUSD to the TerraLUNA stablecoin that collapsed in 2022. At that time, TerraLUNA offered a similar yield of about 20% through the Anchor Protocol.
Binance has not publicly disclosed how BFUSD generates such a high annual percentage yield. In response to inquiries, Binance stated that it will share more details about the asset's yield mechanism in the near future.
According to Binance's release page, users holding BFUSD can use it as collateral without needing to stake or lock it up. Users simply need to store BFUSD in the designated 'UM wallet' to receive daily airdrop rewards based on hourly snapshot data. These rewards will be sent directly to the user's 'UM futures wallet.' Eligibility and restrictions for BFUSD will depend on the user's VIP level on the platform.
High-yield, robust return crypto assets are in demand
BFUSD is part of the trend of high-yield tokenized products, which, while similar to stablecoins, do not follow traditional reserve-backed models. Similar products on the market include BlackRock's BUIDL token and Ethena's USDe, which use innovative financial strategies such as delta hedging or investing in U.S. Treasury bonds to provide competitive yields.
A Brief History of Binance Stablecoins
Binance has a certain history in the stablecoin ecosystem. In 2019, it collaborated with Paxos to launch Binance USD (BUSD), with Paxos serving as the token issuer and custodian. However, due to regulatory scrutiny in the United States, Binance was forced to gradually phase out BUSD by February 2024. The exchange suggests users switch to First Digital USD (FDUSD), a stablecoin introduced as an alternative.
As Binance commits to further disclose details, the crypto community will closely monitor whether BFUSD can fulfill its promises without repeating the pitfalls of similar products in the past.
This article BFUSD: Binance clarifies that the new product is not a stablecoin, with annual yields of nearly 20% first appeared on Chain News ABMedia.
