Binance explains BFUSD asset as non-stablecoin amid concerns

Binance has addressed concerns about its upcoming BFUSD token, clarifying that it is not a stablecoin, following apprehension from users comparing it to the failed TerraClassicUSD (CRYPTO:USTC). 

In a November 17 post on X, crypto news aggregator Zoomerfied described BFUSD as a stablecoin with an annual yield of 19.55%, which immediately raised caution due to the memory of Terra's algorithmic stablecoin collapse. 

"BFUSD is not yet launched. To be clear, it is not a stablecoin but a reward-bearing margin asset for futures trading," explained Binance Customer Support on X.

According to Binance’s official details, BFUSD will act as collateral for margin trading and will allow users to earn daily airdrops without requiring funds to be locked up. 

The asset will be stored in a “UM wallet,” with rewards sent to users’ “UM Futures Wallet” based on snapshots. 

The availability of BFUSD will vary depending on a user’s VIP status on the platform. 

Prior to Binance’s clarification, some crypto commentators had voiced their concerns, recalling Terra’s Anchor Protocol, which promised 20% yields on UST. 

The collapse of UST in May 2022 saw its price plummet from $1 to below $0.01, triggering a loss of confidence and a bank run-like scenario. 

Terra’s associated token, LUNA, also fell dramatically from $80 to less than $0.001 in just one week. 

Long-standing crypto figures, such as Jameson Lopp, noted the parallels, reflecting the community's wariness toward high-yield assets. 

While the introduction of BFUSD raised initial questions, Binance’s quick clarification aimed to distinguish its new product from historically troubled projects and reassure the market.