Update: Binance has stated that BFUSD is not a stablecoin but a “reward-bearing margin asset for futures trading.” It has not yet been clarified further.]
Binance has launched BFUSD, a yield-bearing stablecoin-like token for futures and perpetuals traders, according to a Nov. 18 announcement.
BFUSD provides an annual percentage yield (APY) of approximately 19.55%, allowing users to earn daily rewards by holding BFUSD in their Binance futures accounts without the need to stake or lock funds.
According to BFUSD’s page, users can acquire the token through Tether USD (USDT) swaps. It maintains stability with a collateralization ratio of 105.54%, supported by a reserve fund holding 1.1 million USDT as of Nov. 17.
Notably, users from regions where Binance Futures are not allowed, such as Brazil, don’t have access to BFUSD. Additionally, BFUSD does not accrue user rewards in countries where the Markets in Crypto-Assets (MiCA) regulation is in effect.
Each user has a BFUSD holding limit, determined by their VIP level on Binance. This limit is enhanced by performing know-your-customer (KYC) processes and reaching trading volume thresholds.
Interest is calculated based on the lowest BFUSD balance recorded from hourly snapshots taken throughout the day, with distributions made daily to users’ UM Futures accounts.
In Multi-Asset Mode, BFUSD can be used as collateral with a 100% collateral ratio, allowing traders to expand their trading potential across various assets.
Competitive landscape
The BFUSD is Binance’s latest pegged-asset foray since the New York Department of Financial Services (NYDFS) ordered the firm’s partner Paxos to stop issuing Binance USD (BUSD) in February 2023 amid US regulators’ scrutiny over the exchange.
Since then, Binance has been unwinding the BUSD usage, removing it from its SAFU Fund, and stopping borrowing and staking services.
In December 2023, Binance entirely stopped supporting BUSD, steering users to First Digital’s FDUSD stablecoin. Stablecoins such as Ethena’s sUSDe present 29% APY, while Tether’s USDT dominates 74% of the market.
Moreover, tokenized money funds such as BlackRock’s BUIDL add an extra competitive layer, as the asset manager plans to treat the funds’ shares as stablecoins used as collateral.
It remains to be seen if Binance’s move can pay off during the current crypto market bull cycle and if it is worth the risk of another round of regulatory pressure.
