Binance launches BFUSD stablecoin offering 19.55% APY

Binance has introduced a new stablecoin, BFUSD, with an annual percentage yield of 19.55%. The stablecoin is designed to appeal to crypto users seeking passive income. 

The total supply of BFUSD is capped at 20 million tokens, and the stablecoin operates with a collateralization ratio of 105.54%. Binance’s program allows users to earn rewards without staking or locking up their funds, according to Binance. 

Stablecoins like BFUSD are cryptocurrencies designed to maintain a stable value, often pegged to traditional currencies like the U.S. dollar. They are commonly used for trading, lending, or earning interest in decentralized finance platforms. 

According to the information on the Binance website, it seems that the stablecoin can be utilized as collateral with a collateral ratio of 100%, which makes it an appealing option. However, the origin of the yield and its sustainability remain unclear at this time.

Binance’s dive into stablecoins 

Binance has dabbled with a stablecoin before with their BUSD stablecoin. The coin faced significant challenges in 2023. 

Issued by Paxos and regulated by the New York Department of Financial Services, BUSD was designed to maintain a 1:1 peg to the U.S. dollar with reserves held in cash or U.S. Treasuries. 

However, in February 2023, Paxos was ordered to stop issuing BUSD due to regulatory scrutiny from U.S. authorities, including the SEC, which suggested BUSD might be classified as an unregistered security.

This regulatory intervention led to a decline in BUSD’s market capitalization, dropping from over $16 billion in early 2023 to under $3 billion by the end of the year.

The halt in new issuance also prompted Binance to shift its focus toward other stablecoins, like USDT (USDT) and its newly launched BFUSD. Despite its struggles, BUSD continued to function within the Binance ecosystem as a tool for trading and collateral in DeFi, though its future remained uncertain.