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What is BFUSD and How to Use it as Margin in Futures Trading?

What is BFUSD and How to Use it as Margin in Futures Trading?

2024-11-22 04:07
What is BFUSD?
What is BFUSD?
Disclaimer: In compliance with MiCA requirements, unauthorized stablecoins are subject to certain restrictions for EEA users. For more information, please click here.
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What is BFUSD?

BFUSD is an innovative reward-bearing asset introduced by Binance to provide users with the opportunity for returns on Qualifying Balances in their Futures Account. BFUSD can also be used as Margin in multi-asset mode Futures Accounts, whilst still earning rewards.
BFUSD is redeemable for USD Stablecoin, making it an ideal choice for users seeking a stable solution in the crypto market.
Binance Futures users holding BFUSD in their Futures Account will receive a daily reward in USD Stablecoin at the Applicable Reward Rate for their Qualifying Balance.

What are the benefits of holding BFUSD?

When enabling multi-asset mode, you will be able to use BFUSD as Margin to trade USDⓈ-M contracts.
Users who meet the below requirements will be eligible to receive daily USD Stablecoin reward (if any) based on the Applicable Reward Rate. The Applicable Reward Rate will depend on whether the BFUSD holder has qualifying USDⓈ-M trading activity on their Futures Account. There are two reward rates available each day:
  • Base Rate: for BFUSD holders with no USDⓈ-M trading activity; or
  • Boosted Rate: a relatively higher rate for BFUSD holders with qualifying USDⓈ-M trading activity.
Find out more about how the rewards are determined here.

What are the sources of funding for Reward Amounts?

To provide Futures users holding BFUSD with daily Reward Amounts, Binance uses its proceeds from BFUSD sales to execute investment strategies that generate passive income. The funding for Return Amounts comes from two primary sources:

Funding Fee Income

Binance employs a delta-neutral strategy by hedging Futures positions with spot positions to collect Funding Fees. Funding Fees are periodic payments between long and short position holders in perpetual futures markets, intended to align the futures prices with the spot prices of the underlying asset.
The funding rate determines the Funding Fee, and fluctuates over time for every symbol independently. You can find an overview of the funding rates here for every symbol on Binance Futures. For more information about the Funding Fees, please refer to this blog: ‘What Are Funding Fees in Binance Futures’.
This strategy offsets price movement risks by taking opposite positions in the Futures and Spot markets, ensuring that profits from one position counterbalance losses from the other. The primary goal is to profit from Funding Fee payments when the Funding Rate is positive for short futures positions, without significant exposure to price volatility. For more information on Binance Futures’ Funding Rate history, please refer to this page.

Staking Rewards

Binance stakes crypto assets to generate staking rewards. For example, ETH may be staked via Binance Earn to get WBETH staking rewards. For more information on what WBETH is and how ETH staking works in Binance, refer to this page.

What is the BFUSD Reserve Fund and How does it Work?

The Reserve Fund is a balance maintained by Binance specifically for BFUSD to cover Potential Costs from Funding Fees, supporting the maintenance of the BFUSD Collateral Pool and the BFUSD Hedging Portfolio.
To provide a stable and secure environment for BFUSD holders, a robust reserve fund, including an initial $1 million at the launch of BFUSD, has been established (i.e. the BFUSD Reserve Fund). Here are key takeaway points about the BFUSD Reserve Fund:
  • Funding Source: The BFUSD Reserve Fund is funded from passive income generated by Binance that is not allocated to fund the Base Rate and Boosted Rate. The percentage of passive income allocated to the BFUSD Reserve Fund may change based on market conditions or adjustments in Binance’s investment and hedging strategies.
  • Stand Alone: The BFUSD Reserve Fund is separate from the Futures Insurance Fund and is not related to the operation of Auto-Deleveraging.
  • Review and Calibration: The required minimum size of the BFUSD Reserve Fund will be reviewed by Binance from time to time as it deems appropriate.

Allocation and Management:

  • Positive Funding Rate: When Funding Fees provide an income, a portion of that income will be allocated to the BFUSD Reserve Fund.
  • Negative Funding Rate: If the Funding Fee results in a cost, the Reserve Fund will cover the Funding Fee cost to maintain the hedge positions in the collateral portfolio. During periods of sustained negative Funding Rates, Binance may adjust its hedging and investment positions, including reducing to USD Stablecoin. BFUSD holders will not incur any losses from Binance’s management of the BFUSD Collateral Pool and BFUSD Hedging Portfolio, even during unfavorable market conditions.
  • To the extent that the size of the BFUSD Reserve Fund is deemed insufficient by Binance, then Binance may (but is not required to) contribute additional assets to the BFUSD Reserve Fund. The composition of the BFUSD Reserve Fund may also be rebalanced by Binance from time to time, as it considers appropriate in its sole and absolute discretion.
  • If the size of the BFUSD Reserve Fund exceeds the required minimum determined in a periodic review, any funds in excess of the required minimum may be deployed by Binance for other purposes as it considers appropriate.

What are some risks of holding BFUSD?

  • Negative Funding Rates: When the Funding Rate for short futures positions is negative, Funding Fees will impose a cost to the BFUSD Hedging Portfolio. In such circumstances, there’s a chance that no Reward Amounts will be issued to BFUSD holders. Note that even if the Funding Rate is negative, neither the Base Rate nor the Boosted Rate will ever be negative. Binance may cover any Funding Fee costs using the BFUSD Reserve Fund. For more information on the Funding Rate History, refer to this page.
  • Rights: By holding BFUSD you are entitled to (i) redeem each BFUSD for a USD Stablecoin on a 1:1 basis in accordance with the BFUSD Terms and (ii) receive the Reward Amount in respect of each Calculation Day at the Applicable Rate for which you satisfy qualification requirements in accordance with the BFUSD Terms, from Binance. You will have no right, claim, entitlement or other interest (whether direct or indirect) in any assets comprising or returns generated by the BFUSD Collateral Pool, the BFUSD Hedging Portfolio or the BFUSD Reserve Fund, all of which are legally and beneficially owned solely for the benefit of Binance. The Base Rate and the Boosted Rate are alternatives and not cumulative (i.e. you will only qualify for one or the other rate depending on your qualifying trading activity on the relevant day).
  • The Boosted Rate will typically be higher than the Base Rate: the Base Rate and the Boosted Rate will be determined separately by Binance in respect of each Calculation Day at Binance’s sole discretion. The Boosted Rate that is determined by Binance will be higher than the Base Rate, unless both rates are set at zero. The extent to which the Boosted Rate is higher than the Base Rate may differ from Calculation Day-to-Calculation Day. Binance is not bound to any historical basis between the Boosted Rate and the Base Rate, and any historical basis is not indicative of future differences in performance between the Base Rate and the Boosted Rate.
  • Binance Credit Risk: By holding BFUSD, you are taking credit risk on Binance, and in the event of Binance’s insolvency or operational failure, you may be unable to redeem your BFUSD or access Reward Amounts. The balances of the BFUSD Collateral Pool, the BFUSD Hedging Portfolio and the BFUSD Reserve Fund are Binance’s own property, operated for its own account, and are not segregated. In the event of insolvency of Binance, you will be a general unsecured creditor of Binance. You have no interest in the BFUSD Collateral Pool, the BFUSD Reserve Fund nor the BFUSD Hedging Portfolio;
  • Redemption Failure: Binance reserves the right to suspend or delay redemptions for up to seven consecutive days. Binance’s ability to promptly redeem BFUSD for a USD Stablecoin may be adversely affected or delayed where the redemption of a significant proportion of BFUSD is requested on the same date, in which case Binance would need to take action to liquidate and adjust the BFUSD Collateral Pool and BFUSD Hedging Portfolio to fund redemption requests. During this time, you will not be able to access the USD Stablecoin associated with that redemption, but the BFUSD held in your Futures Account (provided it is in multi-asset mode) will continue to constitute Margin in your Futures Account until the redemption is settled (i.e. there will be no effect on your Margin Requirement on account of the delay or suspension pending settlement). You will be notified on the Platform if there is a delay or suspension of redemptions. If your redemption request fails for any reason, you may re-submit your redemption request on the next following UTC day.
  • Variable Fees: Purchases and redemptions of BFUSD are subject to a Purchase Fee and a Redemption Fee respectively. The Purchase Fee and Redemption Fee are variable. Binance has full discretion to adjust the fees from time-to-time. The applicable Purchase Fee or Redemption Fee will be displayed on the Platform prior to your confirmation of a purchase or redemption transaction. Please check the applicable fee before confirming your transaction. No Redemption Fee applies if Binance exercises its right to repurchase your BFUSD.

Frequently Asked Questions

Binance utilizes a delta-hedging strategy by holding long positions in the Spot market while simultaneously opening short positions in the Futures market to stabilize value.
For instance, for every 3,000 BFUSD, Binance buys 3,000 worth of ETH on the Spot market and takes an equivalent short position in Futures at the same price. If ETH's price rises to 4,000, the Spot position gains 1,000, while the Futures position records a 1,000 loss, effectively locking the ETH value at 3,000, and the same principle applies if the price drops.
The Reward Amount for a Calculation Day will be calculated by Binance and distributed in USD stablecoin to the UM futures wallet on the following day at around 05:00 to 06:00 UTC. Kindly note that the distribution time is not guaranteed and may change from time to time.
The Reward Amount for each Calculation Day (CD) will be calculated as follows:
For example, if a user holds 10,000 BFUSD yesterday, and previous day’s applicable reward rate is 30%, the user’s daily reward is as follows:
For more information, please refer to this FAQ: ‘How are the Reward Rates for BFUSD Holders determined’.
Notes:
  • Calculation Day: 00:00:00 to 23:59:59 UTC
  • Your lowest balance of BFUSD on a Calculation Day is used as the basis for determining the Qualifying Balance and the Reward Amount.
  • Rewards received from BFUSD holding does not disqualify users from receiving funding fees on their own hedging strategies
No, the APYs referenced on the product page are historical APY from previous days of operation, it does not represent guaranteed future results. Please refer to the previous section for potential risks associated with holding BFUSD.
No, the collateral value ratio for BFUSD (for the purposes of meeting the Margin Requirement in multi-asset mode) is determined independently.
Kindly refer to our Trading Rules for more information.
BFUSD can be exchanged from and to USDT at a conversion rate of 1:1. Both the Purchase and Redemptions are subject to 0.1% in fees. Binance reserves full discretion to adjust the Purchase Fee and Redemption Fee from time-to-time.
Yes, master and sub-accounts can purchase BFUSD.
Note: Virtual sub-accounts cannot purchase BFUSD. However, users can purchase BFUSD from their master account and transfer it to their virtual sub-account through this API: POST /sapi/v1/sub-account/futures/internalTransfer
No, API is not available.
It is not supported.
No.
Any USDⓈ-M trades opened regardless of asset mode (single or multi-asset) or margin asset are counted to qualify for the Boosted Rate.
Users do not need to trade with BFUSD as margin to qualify for the Boosted Rate.
Note: USDⓈ-M trades from Copy Trading or Trading Bots do not qualify for the Boosted Rate.
The System Collateral Percentage is calculated using the following:
System Collateral Percentage = Total BFUSD in Circulation / (Total Asset Holding + Reserve Fund Amount) x 100%
At present, only USDT is supported. This means that all purchases, rewards and redemptions, are denominated and paid in USDT.
Please note:
  • Binance has the right to provide support for further USD Stablecoins in the future.
  • Binance also has the right to remove the support for any particular USD Stablecoin (including, without limitation, USDT) at any time.
  • Where Binance makes changes to the form of USD stablecoin supported, the USD stablecoin you use to purchase BFUSD may not be the same USD stablecoin that will be credited on redemption, and/or the USD stablecoin used to credit rewards may change.
The Maximum Limits differ according to one’s VIP level, please refer to the table below:
VIP levelMaximum Limit per Master or Sub-Account (in BFUSD)
0100,000
1400,000
2600,000
3800,000
41,000,000
51,200,000
61,400,000
71,600,000
81,800,000
92,000,000
Notes:
  • The maximum purchase limit is independent among master or sub-accounts.
  • To monitor more real-time changes in the maximum holding limits, refer to our Trading Rules.
Auto-Exchange might happen when liquidation happens. For more information, please refer to these FAQs:
Binance has the right to restrict redemptions as it considers appropriate and to delay or suspend redemptions for up to 7 consecutive days at its discretion.
Binance intends to maintain a portion of the collateral balance in USD Stablecoin to fund redemptions. The redemption pool will rebalance periodically to maintain an appropriate balance of USD Stablecoin for redemption purposes. Nonetheless, a large amount of redemption requests on any given day may lead to temporary shortages in available USD Stablecoin balances for redemptions of BFUSD. In these circumstances, Binance may determine to restrict, suspend or delay redemptions to allow it to liquidate and adjust the positions in the BFUSD Hedging Portfolio and BFUSD Collateral Pool to fund the redemptions and replenish the redemption pool.

If your attempts to redeem have been unsuccessful, please try again on the next day.

If redemptions are restricted, suspended or delayed due to a temporary shortage of USD Stablecoins, the processing of redemptions should resume once Binance has adjusted the BFUSD Hedging Portfolio or liquidated assets in the BFUSD Collateral Pool to obtain sufficient USD Stablecoin to fund redemptions.
USD Stablecoin will be credited to your USDⓈ-M futures wallet immediately after a successful redemption, subject to regulatory and compliance restrictions.
You need to have supported USD Stablecoin assets in your USDⓈ-M Futures wallet first. You will not be able to purchase more BFUSD if you already hold the Maximum Limit of BFUSD in your Futures Account.
Your lowest balance of BFUSD on a Calculation Day is used as the basis for determining the Qualifying Balance and the Reward Amount (as determined by Binance measuring balances periodically during that Calculation Day). Please check the published Base Rate and Boosted Rate for the day in question. Note that the Base Rate and/or Boosted Rate may be zero for any particular day, which may be due to Funding Fees costs in respect of short futures positions.
Here are the other possible reasons:
  • You may not be entitled to a Reward Amount in respect of the first UTC day on which you purchase BFUSD nor in respect of the last UTC day on which you cease to hold BFUSD.
  • To the extent you purchase additional BFUSD or partially redeem your holding of BFUSD during a UTC day, that purchased/redeemed amount of BFUSD will not count towards your Qualifying Balance for the Calculation Day and you will not receive a Reward Amount in respect of that newly purchased/redeemed BFUSD for that Calculation Day.
The above description of risks is not exhaustive. Please find further risk disclosures in the BFUSD Terms. Please also refer to the General Risk Warning and Responsible Trading page.
Disclaimer: You are solely responsible for your investment decisions and Binance is not liable for any losses you may incur. The reward rates (including the Base Rate and the Boosted Rate) are calculated daily, and are expressed as an annualised percentage yield (APY) for illustrative purposes only. Each reward rate is not representative of the performance of BFUSD for any period other than the particular date specified and is not indicative of future results. The reward rates are likely to fluctuate day-to-day. Past performance is not a reliable predictor of future performance. You should only invest in products you are familiar with and where you understand the risks. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial adviser prior to making any investment. BFUSD cannot be withdrawn or used for any purpose other than as margin in a Binance Futures Account. Redemption restrictions may apply, which may affect your ability to redeem BFUSD for a supported USD stablecoin. This material should not be construed as financial advice. For more information, see our Terms of Use, the BFUSD Terms and our Risk Warning. To learn more about how to protect yourself, visit our Responsible Trading page.
These BFUSD FAQs may have been translated and published in different languages. In the event of any inconsistency, misstatements, omissions, or errors appearing in any translated version, the English version shall prevail.
These BFUSD FAQs should be read in conjunction with the BFUSD Terms (and any documents incorporated by reference in the BFUSD Terms). The BFUSD Terms are a legally binding agreement, the terms of which you must read, understand and accept before purchasing BFUSD. The content of these BFUSD FAQs is for information only, and does not form part of the BFUSD Terms.