Binance has recently launched BFUSD, a yield-bearing stablecoin designed for futures and perpetuals traders. This new stablecoin offers users an annual percentage yield (APY) of around 19.55%, allowing them to earn daily rewards by holding BFUSD in their Binance futures accounts without the need to stake or lock funds. Users can acquire BFUSD through Tether USD (USDT) swaps, and it is backed by a collateralization ratio of 105.54%, with a reserve fund holding 1.1 million USDT as of Nov. 17.
Unfortunately, users from certain regions where Binance Futures are not allowed, such as Brazil, do not 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, with the limit being 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. This move by Binance comes after 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.
As Binance re-enters the stablecoin market, the landscape has become much more competitive. Stablecoins such as Ethena’s sUSDe offer a 29% APY, while Tether’s USDT dominates 74% of the market. Additionally, tokenized money funds like 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 whether Binance’s bold move with BFUSD can pay off during the current crypto market bull cycle and if it is worth the risk of potentially facing another round of regulatory pressure.
