- Binance confirms BFUSD is a margin trading product, not a stablecoin.
- Comparisons to Terra’s failed USTC sparked fear in the crypto community.
- BFUSD offers daily rewards for futures trading without staking or locking funds.
- Skepticism lingers as the crypto space remains wary of high-yield promises.
Binance has stepped forward to address confusion and concerns surrounding its upcoming BFUSD token. Amid speculation that likened BFUSD to Terra’s catastrophic USTC, Binance clarified that its new product is not a stablecoin but a reward-bearing tool for margin trading in the futures market.
The exchange’s statement aims to reassure users while navigating a crypto community still haunted by memories of Terra’s collapse.
What Is BFUSD? Binance Explains
The rumors began on November 17, when a post by crypto news aggregator Zoomerfied suggested that Binance was launching a stablecoin offering a 19.55% annual yield. For many, this sounded eerily similar to Terra’s USTC, which once promised 20% returns before imploding in 2022.
https://twitter.com/BinanceHelpDesk/status/1858613807494688975
Binance quickly clarified on X (formerly Twitter) that BFUSD is not a stablecoin and has yet to officially launch. Instead, BFUSD is designed to function as collateral for futures trading, allowing users to earn daily rewards without staking or locking their funds. Rewards will be airdropped to users’ UM Futures Wallets, with availability tied to their VIP level on Binance.
Why the Comparisons to Terra’s USTC?
The parallels between BFUSD and Terra’s USTC stirred strong reactions in the crypto community. Terra’s algorithmic stablecoin, hailed as an innovation, collapsed spectacularly in May 2022. The stablecoin lost its $1 peg, while its companion token, LUNA, plummeted from $80 to less than a cent, wiping out billions of dollars in value and sparking a market-wide crisis.
https://twitter.com/lopp/status/1858609316929974340
Understandably, crypto traders like RunnerXBT and Jameson Lopp voiced concerns about BFUSD’s yield model, questioning its sustainability and whether it could share flaws with previous high-yield products. Some even suggested that users might unknowingly fund the rewards, adding to the skepticism.
Stablecoins vs. BFUSD: Clearing the Confusion
The distinction Binance is making is critical. Stablecoins, like Tether’s USDT or Circle’s USDC, aim to maintain a stable value by pegging to fiat currencies or other assets. They’re popular for payments, trading, and as a hedge against volatility.
BFUSD, on the other hand, is not pegged to any asset and isn’t designed to provide price stability. Instead, it offers variable rewards tied to trading activity, setting it apart from traditional stablecoins.
