BFUSD serves as collateral for margin trading without requiring fund staking or lock-up.
On November 18, 2024, Binance unveiled BFUSD, attracting immediate interest and confusion within the crypto community. Early reactions suggested that BFUSD could be a high-yield stablecoin, given its promising 19.55% annual percentage yield (APY) and the “USD” label. However, Binance promptly clarified the situation, emphasizing that BFUSD is not a stablecoin, and its launch has yet to take place.
Not a Stablecoin — Just a High-Yield Margin Asset
Responding to widespread speculation, Binance posted on social media platform X (formerly Twitter) to correct a prevailing misunderstanding. The company clarified that BFUSD has not yet launched and functions as a reward-bearing margin asset designed for futures trading rather than a stablecoin.
“BFUSD is not yet launched. To be clear, it is not a stablecoin but a reward-bearing margin asset for futures trading. We are glad to see the community’s interest and will be sharing more details soon including how APY is determined,” the company explained.
Despite Binance’s direct clarification, the fine print on the BFUSD product page states:
“Enjoy attractive high APY on your BFUSD holdings, surpassing the yields offered by many other stablecoins.”
This comparison raised doubts, as stablecoins are typically pegged 1:1 to the US dollar. Binance has yet to fully explain how this asset will generate its high yield, although it has promised additional details shortly.
Information from Binance’s BFUSD page suggests the asset diverges significantly from conventional stablecoins. BFUSD serves as collateral for margin trading without requiring fund staking or lock-up. Instead, users retain the asset in a UM wallet, earning daily airdrops calculated through hourly snapshots of their holdings. Rewards are then deposited into a UM Futures Wallet.
The mechanism behind the 19.55% APY remains uncertain. Binance’s customer support on X mentioned forthcoming details about APY determination, leaving users speculating in the interim.
What’s behind Binance’s High-Yield Product?
BFUSD’s launch follows a growing trend in the crypto space, where firms are offering high-yield tokens pegged to the US dollar but based on the traditional stablecoin model. For example, BlackRock has introduced its BUIDL token, an on-chain money market fund that invests in short-term US Treasury bills. Similarly, Ethena has launched USDe, a synthetic dollar designed to maintain its peg using an automated delta-hedging strategy.
Binance, of course, has its own history with stablecoins. In 2019, it launched Binance USD in partnership with Paxos, a Web3 payments infrastructure firm. BUSD was pegged 1:1 to the U.S. dollar, and Paxos handled the issuance and reserves. However, following increasing regulatory scrutiny from US authorities, Binance phased out support for BUSD by February 2024.
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