Binance officially launched the interest-bearing asset BFUSD today, allowing users to earn high returns by holding BFUSD. Whether this will prompt other exchanges to follow suit is a topic for further discussion, particularly regarding whether such interest-bearing stablecoin-like assets will threaten the position of non-yielding stablecoins like USDT and USDC. (Background: Binance officially launched the "interest-bearing margin BFUSD" with up to 30% annual yield; what are the features and risks?) (Additional background: Binance BFUSD annualized at 19.55%! Triggering reaction to the LUNA crash, officials quickly downplay: This is not a stablecoin...) The world's largest exchange, Binance, officially launched the interest-bearing margin asset BFUSD today (27th), which is now available for purchase on the Binance contract trading platform. According to official explanations, users can use BFUSD as margin for trading Binance's USDⓈ-M contracts, with the main feature being that the BFUSD held in users' wallets will earn daily rewards in stablecoins. According to the official website, the current basic annualized rate for BFUSD is 18.14%, and the enhanced annualized rate is 23.9%. The reason for such high returns is that BFUSD will obtain funding fees through term arbitrage. BFUSD employs a neutral hedging strategy, earning funding fees through hedging futures and spot positions. Funding fees are periodic payments made by both long and short sides in the perpetual futures market to keep futures prices aligned with spot prices. When the funding rate is positive, Binance profits from short futures positions, and due to holding an equivalent amount of spot, it does not have to worry about value loss. However, it should be noted that if the market returns to a bear phase, the yield could theoretically drop to single digits. As for whether the funding rate could potentially turn negative, according to The Block's report, Binance has promised that the yield on BFUSD will never be negative, and initial expectations include official subsidies. Note: It is understood that BFUSD is not an ordinary stablecoin and cannot be withdrawn from Binance's contract accounts or traded in the open market. It can only be used as margin for Binance contract trading and can be exchanged 1:1 with USDT. The potential of BFUSD: Will it change the margin ecosystem of exchanges? Simply put, if you are an active contract operator, you typically keep a certain amount of funds in your contract account. In the past, this capital could only be used as margin and could not earn returns from other derivative products (such as investing in USDT's current or fixed products). But the advantage of BFUSD is that while fulfilling your margin holding requirements, it also provides investors with more opportunities to generate profits, which may become a major incentive for attracting investors to transfer funds to this platform. As for what benefits Binance offers? We know that the most profitable product for exchanges is the transaction fees from contract trading. When more people transfer funds to this platform for trading, it naturally benefits Binance itself. Today is the first day of BFUSD. If the effect of attracting funds is very good in the future, it is reasonable to speculate that it will lead to a loss of stablecoin capital stock from other exchanges; in response, other exchanges may likely launch margin products similar to BFUSD to retain user funds. Will interest-bearing stablecoins become Tether's biggest competitor? We know that USDT is currently the largest stablecoin, but they do not provide users with additional rewards, as the issuer Tether earns substantial profits simply by buying U.S. Treasuries. To compete, more and more interest-bearing stablecoins have been launched in the market recently, some with models similar to BFUSD that provide stable returns through term arbitrage, and some that earn interest by buying U.S. Treasuries. It is reasonable to speculate that "interest-bearing stablecoins" will become USDT's biggest competitors in the future, and may even prompt USDT, USDC, and other non-yielding projects to start offering stable returns, which is worth our ongoing attention. What are the risks of holding BFUSD? Although Binance emphasizes that BFUSD is not a stablecoin, its 1:1 exchange model with USDT makes its practical use not much different from a stablecoin. However, of course, while BFUSD offers high yield opportunities, it also carries the following risks: Negative funding rate: If the funding rate for short futures positions is negative, it may lead to an inability to pay returns to BFUSD holders. Credit risk: Holding BFUSD means taking on Binance's credit risk; if Binance fails to pay or fails to operate, users may not be able to redeem BFUSD or receive returns. Redemption restrictions: Redemptions may be delayed due to high demand or market volatility, but users' BFUSD can still serve as margin for futures accounts. Variable transaction fees: Purchasing or redeeming BFUSD incurs transaction fees, which Binance can adjust at any time; specific fees will be displayed before the transaction. Further reading: Paxos recently launched interest-bearing stablecoin "USDL" with a daily distribution of 5% returns; can it shake the monopoly position of USDT and USDC? Related reports: Meme coins WHY and CHEEMS listed on Binance saw a shocking "liquidation-style crash"; large holders call: Please take it slow on the mouse warehouse dumping! DeSci sector surges, detailed explanation of decentralized science potential backed by Binance investment and CZ endorsement. Bitcoin hot money flows) Binance's monthly trading volume reaches 2 times that of the New York Stock Exchange, with stablecoin inflows hitting a new high; Tether's market value surpasses Citibank. "Views) Why Binance's "interest-bearing margin BFUSD" could potentially change the stablecoin ecosystem of exchanges?" This article was first published in BlockTempo (the most influential blockchain news media).

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