Binance announced the official launch of BFUSD on the exchange. While some may confuse it with the next generation of BUSD (Binance’s discontinued stablecoin), the exchange clarified that it is not a stablecoin.
BFUSD trading is expected to begin on November 27, 2:00 UTC in Binance Futures. Early buyers who buy and hold BFUSD in their Futures account will qualify to earn daily rewards (APY). However, BFUSD holders that trade USDⓈ-M Futures daily will enjoy a boosted rate.
Zero fees will be set for a limited period of time.
What is BFUSD, and how it works?
As USD is mentioned in the token’s name, many initially thought it was a stablecoin. Binance had to reclarify that BFUSD is not a stablecoin but a ‘yield-bearing futures trading margin asset.’
BFUSD rewards are generated from Binance’s delta hedging strategies, hedging between the spot and futures markets. Binance will also use the proceeds from the sale of BFUSD to buy ETH and stake for rewards. The staking rewards will contribute to the rewards for token’s holders.
The new token will have a base rate and a boosted rate that will be set daily. Traders who fail to meet the qualifying USDⓈ-M trading activity on any day will earn the base rate, while those who are qualified will enjoy the boosted rate.
The base and boosted rates may be zero when there is a cost for Binance from the funding fees.
If you are already trading crypto futures or considering it, earning passive income through BFUSD by trading futures on Binance is an attractive incentive.
A $1M USDT reserve fund has been prepared for the token launch. BFUSD can only be purchased via USDT at the time of this writing.
BFUSD has a fixed supply of 20M.
MiCA regulations
BFUSD is expected to be pegged to the U.D. dollar, so many confused it with a stablecoin. However, due to European MiCA and other stablecoin regulations, the exchange does not wish to find its new token restricted for failing to comply with regulations.
Although the official disclaimer states that ‘in compliance with MiCA requirements, unauthorized stablecoins are subject to certain restrictions for EEA users,’ it is unclear whether Binance’s latest cryptocurrency will be recognized as a stablecoin or a yield-bearing asset.
