Binance launches BFUSD stablecoin offering 19.55% APY

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

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

Stablecoins such as BFUSD are cryptocurrencies designed to maintain a stable value, usually pegged to traditional currencies such as the US dollar. They are widely used to trade, lend, or earn interest on decentralized finance platforms.

According to the information on the Binance website, it appears that the stablecoin can be used as collateral with a 100% collateral rate, which makes it an attractive option. However, the source and sustainability of the yield currently remain unclear.

Binance’s dive into stablecoins

Binance has previously dabbled in stablecoin with its BUSD stablecoin. The coin faced significant difficulties in 2023.

Issued by Paxos and regulated by the New York Department of Financial Services, BUSD is designed to remain pegged 1:1 to the US dollar, with reserves held in cash or US treasury securities.

However, in February 2023, Paxos was ordered to cease issuance of BUSD due to regulatory review by US authorities, including the SEC, which suggested that BUSD could be classified as an unregistered security.

This regulatory intervention led to the market value of BUSD falling, falling from over $16 billion at the beginning of 2023 to less than $3 billion by the end of the year.

The suspension of new issuance also led Binance to shift its focus to other stablecoins such as USDT (USDT) and the newly launched BFUSD. Despite its difficulties, BUSD continued to function as a trading and collateral instrument in DeFi in the Binance ecosystem, but its future remained uncertain.