Binance introduced a new product, BFUSD, on Monday. It will be launched as a “reward-bearing margin asset” for futures trading, offering an annualized yield (APY) of 19.55%. It can also be used as collateral. Binance noted that BFUSD has not yet been launched and is not a stablecoin, but a statement on the footer of its website caught investors’ attention.
The world’s largest cryptocurrency exchange, Binance, has introduced its new high-yielding BFUSD token. However, concerns soon arose that the token was a stablecoin. In an effort to clear up these misconceptions, Binance clarified that BFUSD is not a stablecoin but rather a margin asset that carries rewards for futures trading. It also noted that the token has not yet been launched.
Crypto news outlet Zoomerfied wrote in a post on Nov. 17 that Binance will launch a new stablecoin that will offer an annualized yield of 19.55%. The post led many on social media platform X to make comparisons to Terraform Labs’ failed algorithmic stablecoin TerraClassicUSD (USTC).
Binance responded to these claims by emphasizing that BFUSD is not actually a stablecoin and has not yet been released. The exchange stated that BFUSD is a "reward-bearing margin asset" and can be used as collateral. Binance also announced that investors can use BFUSD to show their funds as collateral "without staking". Investors will hold this asset in a "UM wallet" and receive daily airdrops. The BFUSD quota will be limited according to users' "VIP levels" on the Binance platform.
Following Binance’s BFUSD announcement, some users in the crypto community drew similarities to Do Kwon’s TerraUSD (UST), which promised 20% returns and later crashed. Crypto commentator RunnerXBT drew parallels between Terra’s algorithmic stablecoin UST and Binance’s BFUSD, asking, “How much… how much… yield did Anchor make?” Anchor promised to provide 20% returns while keeping UST stable. However, the collapse of UST in May 2022 led to a massive loss of value for the Terra ecosystem. The collapse of UST also affected Terra’s other token, LUNA, sending the price of LUNA from $80 to below zero in a week.
Some users questioned the source of the high return promises. Another user commented, "Are we the return?" The initial statement also raised suspicions for Jameson Lopp, who is known in the Bitcoin world, and this development attracted the attention of a wide crypto community.
While Binance’s announcement of BFUSD is an important step toward clearing up misconceptions about the token, concerns about the promise of high returns and the source of these promises remain. Similar examples in the crypto world have led to major losses in the past, so investors should be careful to learn more about BFUSD and similar products.
