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Not a Stablecoin: Binance Explains BFUSD’s True Purpose

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.
Not a Stablecoin: Binance Explains BFUSD’s True Purpose

Binance $9.31B 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.

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 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.

In other news, the Financial Stability Board (FSB) has warned that AI vulnerabilities could pose risks to global financial stability. How serious are these risks? Read the full story.

Aaron S. Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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