The world's largest cryptocurrency exchange, Binance, has launched a new asset called BFUSD, sparking speculation that it could be a high-yield stablecoin. However, Binance quickly clarified the misunderstanding, stating that while BFUSD has "USD" in its name and an annualized yield (APY) of up to 19.55%, it is not a stablecoin.
What is BFUSD? A new margin asset
On Monday, Binance announced the launch of BFUSD, describing it as a "yield-bearing futures trading margin asset." Binance
emphasized that BFUSD has not yet been officially launched and is different from traditional stablecoins. Binance denied the claims that BFUSD was mistaken for a stablecoin.
"BFUSD is not a stablecoin, but a yield-bearing margin asset for futures trading," Binance clarified, adding that BFUSD will provide high yields, but did not explain the specific mechanics of these returns.
High yield rate: Comparison with TerraLUNA
The 19.55% annualized yield rate has attracted the attention of the crypto community, with some drawing comparisons between BFUSD and the 2022 collapse of the TerraLUNA stablecoin, which had offered similar yields of around 20% through the Anchor Protocol.
Binance has not yet publicly disclosed how BFUSD generates such a high annualized yield rate. In response to questions, Binance stated that it will share more details about the asset's yield mechanism in the near future.
According to Binance's release page, users holding BFUSD can use it as collateral without the need for staking or locking. Users only need to deposit BFUSD in the designated "UM Wallet" to receive daily airdrop rewards based on hourly snapshot data. These rewards will be directly sent to the user's "UM Futures Wallet." The eligibility and limits for holding BFUSD will depend on the user's VIP level on the platform.
High-yield, stable-yield crypto assets are gaining popularity
BFUSD is part of a trend of high-yield tokenized products that, while similar to stablecoins, do not follow the traditional reserve-backed model. Other market examples include BlackRock's BUIDL token and Ethena's USDe, which use innovative financial strategies like Delta hedging or investing in U.S. Treasuries to provide competitive yields.
A brief history of Binance stablecoins
Binance has a history in the stablecoin ecosystem. In 2019, it partnered with Paxos to launch Binance USD (BUSD), with Paxos serving as the token issuer and custodian. However, due to regulatory scrutiny in the U.S., Binance was forced to phase out BUSD by February 2024. The exchange has recommended users to transition to First Digital USD (FDUSD), a stablecoin launched as an alternative.
As Binance promises to provide more details, the crypto community will closely watch whether BFUSD can deliver on its promises without repeating the issues of similar past products.
