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Crypto exchange Binance has cleared up confusion on its newly released asset, BFUSD’s stablecoin status. The firm has stated in an X post that BFUSD is a reward-bearing margin asset, not a stablecoin.
The confusion started after crypto news aggregator, Zoomerfied’s post on BFUSD on X (formerly known as Twitter) on November 17, 2024. According to the post, Binance was getting ready to launch a high-yield stablecoin offering an annual rate of 19.55%.
Analysts immediately compared it to the infamous TerraUSD (UST), issued by Terraform Labs, which famously collapsed in 2022.
Binance released its comments regarding the increased concern, addressing it through a post on X.
The firm clarified that BFUSD is a reward-bearing margin asset, meant for futures trading. It further noted that the asset has not been launched yet. Traders will be able to use BFUSD in the future as collateral without having to stake or lock up their funds.
The BFUSD token will be held in a ‘UM wallet’, where traders will collect daily airdrops. Airdrops are calculated by snapshots and forwarded to users' ‘UM Futures Wallet’. The token will have limited issuance according to the user's social ranking or ‘VIP level’ on the Binance platform.
Even with the explanation, many in the crypto community quickly likened it to the implosion of high-yielding TerraUSD (UST). TerraUSD similarly promised such high returns, eventually crashing catastrophically. UST lost its US$1 peg in a matter of days in May 2022, erasing billions in value and sending shock waves throughout the crypto space.
The Binance announcement follows a more general trend within the crypto community regarding close scrutiny of high-yield offerings. Critics have questioned yields as unsustainable, especially following the UST debacle. However, some remain hopeful showcasing their optimism on X with memes like the following popping up:
Considering its unclear launch date and yield-based rewards structure, the announcement will continue the debate on the risk and regulation of these high-yield crypto products.
