High-Yield Hype? Binance Declares BFUSD Isn’t a Stablecoin

Not a Stablecoin: Binance Explains BFUSD’s True Purpose

Written by Aaron S.,

Editor-In-Chief

Last Updated: November 19, 2024

Key Takeaways

Binance clarified that its new product is a margin trading asset with reward features, not a stablecoin;
Traders will receive daily rewards for holding BFUSD in a wallet, determined by their Binance VIP level;
The crypto community has drawn parallels to Terra's collapse, raising concerns over high-yield products.

Binance $18.34B has stepped in to clarify misconceptions about its yet-to-be-released "BFUSD" token.

The conversation started when Zoomerfied, a crypto news curator, posted on X on November 17, suggesting Binance was set to launch a stablecoin boasting an annual yield of 19.55%. This sparked widespread comparisons to Terraform Labs’ ill-fated algorithmic stablecoin, TerraClassicUSD USTC $0.0232 .

Responding to the confusion, Binance explained via its customer support on X that BFUSD is designed as a margin trading asset, not a stablecoin. The company clarified, “BFUSD is not yet launched. To be clear, it is not a stablecoin but a reward-bearing margin asset for futures trading”.

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BFUSD is structured to provide rewards without requiring users to lock or stake their funds. Holders will keep BFUSD in a "UM Wallet", with daily airdrop rewards transferred to their "UM Futures Wallet". These airdrops are calculated based on user snapshots and are influenced by each trader's “VIP level”, a social ranking metric on the Binance platform.

While the token's design aims to offer flexibility and convenience, the mention of high yields immediately drew skepticism from crypto veterans. Many recalled the overhyped returns of Do Kwon’s algorithmic stablecoin project, which ultimately ended in disaster.

Some members of the crypto community were quick to connect BFUSD to the failed Terra ecosystem. Pseudonymous trader RunnerXBT sarcastically remarked on X, “How... how much did Anchor... did... Yield?” referencing the Anchor Protocol’s unsustainable promise of 20% annual returns.

The collapse of Terra LUNA $0.4246 in May 2022 serves as a reminder for the crypto world. Once valued at $18 billion, USTC ’s price plunged from its $1 peg to less than a cent in under a month. Terra's companion token, LUNA, fared no better, plummeting from $80 to nearly worthless in days.

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