Binance announces that new BFUSD asset is not a stablecoin
Leading global cryptocurrency exchange Binance on Monday unveiled a new digital asset called BFUSD. However, the crypto exchange subsequently clarified that, despite the "USD" suffix in its name, the asset—which will yield 19.55% annually—is not a stable coin.
BFUSD is not yet launched.
— Binance Customer Support (@BinanceHelpDesk) November 18, 2024
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
Binance explains that BFUSD is not a stablecoin
In response to a cryptocurrency news aggregator @zoomerfied calling the token a "stablecoin," Binance posted on X on November 17 that BFUSD is not a stablecoin and yet to be launched. The exchange stated that BFUSD is a reward-bearing margin asset for futures trading and is excited to see the community's interest.
On the other hand, The Block reported that as of 17:30 UTC, the fine print read: "Enjoy attractively high APY on your BFUSD holdings, surpassing the yields offered by many other stablecoins."
The asset's launch page states that users can use BFUSD as collateral without "staking or locking up your funds." According to the blog, users will instead accumulate daily airdrops sent to their "UM Futures Wallet" based on hourly snapshots while holding the asset in a "UM wallet." Individuals will be assigned a "limit quota of BFUSD" according to their "VIP level."
Meanwhile, Binance has a history with stablecoins of its own. In collaboration with Web3 payments infrastructure company Paxos, it introduced Binance USD in 2019. Paxos managed the issuance and reserves of the BUSD, which was fixed at a 1:1 ratio to the US dollar. However, Binance phased out support for BUSD by February 2024 in response to heightened regulatory scrutiny from US authorities.
Binance BFUSD attracts attention in the crypto community
Due to its exceptionally high APY, the token attracted a lot of attention. Some people compared it to the now-defunct TerraLUNA stablecoin now known as TerraClassicUSD (USTC), which paid users could obtain 20% of through the Anchor Protocol. The way that BFUSD will produce yield is unknown, but according to Binance customer support handle on X, it wrote that we will be sharing more details about how the APY is determined and many more."
Tokenized products pegged to U.S. dollar but are not often called stablecoins
Recently, several companies have launched tokenized products that are based on the US dollar. These products are not commonly referred to as stablecoins because they deviate from the traditional reserve-asset model that was established by Tether and Circle.
Ethena's USDe "synthetic dollar" employs an automated delta-hedging trading strategy to keep its peg, and BlackRock's BUIDL token is an onchain money market fund that invests in short-dated US Treasury bills.
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