On November 27, Binance will introduce BFUSD, a new margin asset that offers rewards in USDT. BFUSD allows users to earn passive income through holding the asset or trading futures based on it.

Introducing BFUSD!

Our new reward-bearing asset built for Futures users is available now.

BFUSD purchase will open on Nov 27, 2am UTC.

Try now 👉 https://t.co/W0WvVrdYpz pic.twitter.com/0ZrEsM9wGE
— Binance (@binance) November 26, 2024

The exchange guarantees that the product’s yield “will never drop below zero.”

“BFUSD holders receive a base annual percentage yield (APY) with daily accrual, even if they don’t actively trade. Those trading marginable futures with USDT or USDC as collateral and settlement currencies can earn a boosted APY for that day,” Binance explained.

BFUSD will be available to Binance Futures users in supported jurisdictions, excluding the United States.

Key Features of BFUSD

A Binance representative told The Block that based on historical data from November 20 to 25, the base APY for BFUSD ranged from 12–35%, while the boosted APY reached 15–47%. However, BFUSD is not classified as a stablecoin since it cannot be withdrawn from Binance or traded on the open market. It can only be used as margin for futures trading and converted into USDT.

How BFUSD Generates Yield

BFUSD yields are derived from two strategies:

Ethereum staking.
Delta hedging of crypto assets between spot and futures markets.

According to Binance, BFUSD’s yield-generation mechanism differs from USDe by Ethena Labs. While USDe utilizes delta-neutral trading and portfolio management strategies often employed in traditional finance (TradFi) to minimize risks, BFUSD offers direct rewards to holders and compensates potential losses using a reserve fund.

“Historical data shows that the ETHUSDT funding rate has been positive on 350 out of 365 days. This creates a strong foundation for BFUSD to consistently generate yield,” Binance emphasized.

The reserve fund will initially hold $1 million in USDT to cover any shortfalls.

Fees and Promotions

The buy and redemption fee for BFUSD is set at 0.1%, but Binance has waived this fee for the promotional period from November 27 to December 26.

Binance has also dismissed comparisons between BFUSD and Terra’s algorithmic stablecoin UST, highlighting significant differences in architecture and mechanics.

Reminder: Binance previously launched various passive income products, such as its Binance Earn suite and staking solutions for cryptocurrency holders.