Binance recently announced the launch of a new yield-bearing stablecoin called BFUSD, offering users an annual percentage yield (APY) of approximately 19.55%. This allows traders to earn daily rewards by holding BFUSD in their Binance futures accounts without the need to stake or lock funds. The stablecoin can be acquired through Tether USD (USDT) swaps and is backed by a reserve fund holding 1.1 million USDT as of November 17th, maintaining a collateralization ratio of 105.54%.
Users in countries where Binance Futures are not allowed, such as Brazil, do not have access to BFUSD. Additionally, countries where the Markets in Crypto-Assets (MiCA) regulation is in effect do not accrue user rewards from BFUSD. Each user’s BFUSD holding limit is determined by their VIP level on Binance, which can be increased by completing 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, prompting Binance to unwind the BUSD usage and transition users to First Digital’s FDUSD stablecoin.
The stablecoin market is highly competitive, with other stablecoins offering higher APY rates and dominating a significant portion of the market share. It remains to be seen how Binance’s new stablecoin offering will fare in the current crypto market bull cycle and whether it will face any regulatory challenges. As Binance re-enters the stablecoin market, the industry landscape has evolved, with new players and innovative offerings reshaping the space. Investors and traders will be closely watching to see how Binance’s BFUSD performs in this competitive environment.