Binance clarified that it is not a stablecoin and has not yet launched its new asset, BFUSD. This clarification comes in reaction to growing worries among the cryptocurrency community regarding the asset’s high promised yields.
On November 17, a post by crypto news aggregator Zoomerfied on platform X (previously Twitter) stated that Binance was launching a stablecoin with an outstanding 19.55% annual dividend. This statement prompted immediate similarities to Terraform Lab’s TerraClassicUSD (USTC), an algorithmic stablecoin that had lost its peg.
According to Binance’s official launch announcement, BFUSD would enable dealers to utilize it as collateral without having to stake or lock their cash. Instead, users will keep BFUSD in an “UM wallet” and receive daily airdrops from their “UM Futures Wallet” based on their holdings snapshots. Furthermore, the platform will restrict access to BFUSD based on users’ social ranks, also known as their “VIP level”.
Prior to Binance’s statement, many in the crypto industry saw similarities between BFUSD and Do Kwon’s USTC, which promised large rewards before crashing. The abrupt revelation of BFUSD’s high yield sounded alarms reminiscent of the Terra crash, in which USTC’s value fell from $1 to less than a penny in a month, causing a widespread loss of faith.
The community reacted quickly, with members questioning the long-term viability of such large yields. Comments such as “Are we the yield?” sparked concerns about potential instability and echoed previous failures in which high returns proved unsustainable.
Binance’s initiative to clarify the nature of BFUSD aims to dispel myths and convince users that the asset is designed for margin trading incentives rather than as a stablecoin. The corporation has committed to revealing more details about the generation of the high yield, but the specifics remain unclear.
This change comes after Binance decided to cease support for its previous stablecoin, BUSD, in February 2024 owing to increased regulatory demands. The debut of BFUSD represents Binance’s continuous innovation in the cryptocurrency sector, though it must strike a delicate balance between giving enticing rewards and preserving customer confidence.
As Binance prepares to introduce BFUSD, the crypto community stays vigilant, eager to see how the platform strikes a balance between high-yield incentives and the reliability and security that customers expect from established financial tools.
