Binance launches yield-bearing stablecoin BFUSD with roughly 20% APY

Binance has introduced BFUSD, a new yield-bearing stablecoin aimed at futures and perpetuals traders, according to an announcement on Nov. 18. BFUSD offers an annual percentage yield (APY) of around 19.55%, allowing users to earn daily rewards by holding BFUSD in their Binance futures accounts without needing to stake or lock their funds.

The stablecoin can be acquired through Tether USD (USDT) swaps and maintains its stability with a collateralization ratio of 105.54%, backed by a reserve fund containing 1.1 million USDT as of Nov. 17. However, users in regions where Binance Futures are prohibited, like Brazil, will not have access to BFUSD. Additionally, users in countries subject to the Markets in Crypto-Assets (MiCA) regulation will not earn rewards from BFUSD.

Each user’s BFUSD holding limit is based on their Binance VIP level, which can be increased by completing know-your-customer (KYC) requirements and meeting trading volume thresholds. Interest is calculated based on the lowest BFUSD balance from hourly snapshots throughout the day, with daily distributions to users’ UM Futures accounts.

In Multi-Asset Mode, BFUSD can be used as collateral at a 100% collateral ratio, enabling traders to leverage

This launch marks Binance’s return to the stablecoin market after the New York Department of Financial Services (NYDFS) ordered its partner Paxos to stop issuing Binance USD (BUSD) in February 2023, following increased regulatory scrutiny. Since then, Binance has phased out BUSD and shifted users to First Digital’s FDUSD stablecoin. The stablecoin market has become increasingly competitive, with products like Ethena’s sUSDe offering a 29% APY, and Tether’s USDT maintaining a 74% market share. Moreover, tokenized money funds, such as BlackRock’s BUIDL, add further competition by positioning their fund shares as stablecoins for collateral. It remains uncertain whether Binance’s latest move will succeed amid the current crypto market cycle and potential regulatory challenges.