According to The Block, Binance is about to launch BFUSD, a "rewarded margin asset" designed to provide passive income.
The cryptocurrency exchange promised that the annual percentage yield (APY) of BFUSD "will not be less than zero" to protect holders from negative yields.
Binance officially launched BFUSD on Tuesday, this "rewarded margin asset" allows users to earn passive income by holding or trading futures, and the product is scheduled to go live on Wednesday (Asia time).
A Binance spokesperson told The Block: "BFUSD is a margin asset designed for futures trading that also provides passive income." He added: "BFUSD holders will enjoy a daily accumulated base APY, even if they do not trade futures, and eligible USDⓈ-Margin futures trading users will enjoy a higher enhanced APY on that day."
USDⓈ-Margin futures are futures contracts on Binance that use stablecoins (such as USDC or USDT) as collateral and settlement currency, providing a stable trading experience by reducing the volatility associated with using cryptocurrencies as collateral.
The spokesperson claims that according to recent historical data, the base APY of BFUSD fluctuated between 12% and over 35% from November 20 to November 25. Additionally, the enhanced APY during this period was approximately 15% to over 47%. However, it is worth noting that BFUSD will officially launch on November 27 at 02:00 UTC, at which time eligible users can begin purchasing, and the above data has not been independently verified.
The spokesperson stated that only eligible Binance futures users supporting the market can purchase BFUSD and noted that the futures platform is restricted in certain regions (including the U.S.).
BFUSD is not a stablecoin
The spokesperson pointed out that BFUSD "is not a stablecoin" because it cannot be withdrawn from a Binance futures account or traded on the open market.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 can be exchanged for USDT stablecoin on Binance," they said.
BFUSD generates returns through two strategies: delta hedging between the spot and futures markets to collect funding fees and staking Ethereum. Delta hedging involves offsetting the price risk of a spot position with an opposite futures position. In the crypto market, when the funding rate is positive, long holders pay funding fees to short positions (and vice versa), ensuring that spot and futures prices ultimately converge.
The structure of BFUSD may be similar to Ethena's "synthetic dollar" USDe, which also uses delta hedging to provide rewards. However, Binance's spokesperson noted that BFUSD is different from USDe, though they did not elaborate further.
A person familiar with how BFUSD and USDe work told The Block: "USDe itself does not generate rewards; users can choose how to use USDe," while "BFUSD is a margin asset with passive rewards."
