Binance Responds to Comparisons Between Upcoming BUFSD and Terra’s UST

The soon-to-be-launched token BUFSD, which promises an annual yield of 19.55%, is not a stablecoin. Representatives from Binance clarified that the asset is a margin product with rewards for futures trading.

BFUSD is not yet launched.

To be clear, it is not a stablecoin but a reward-bearing margin asset for futures trading.

We are glad to see the community’s interest and will be sharing more details soon including how APY is determined

— Binance Customer Support (@BinanceHelpDesk) November 18, 2024

“The asset is not yet launched. We will provide details, including the mechanism for determining APY, later,” promised platform representatives.

This response came after comparisons were drawn with Terra’s algorithmic stablecoin UST, which offered a double-digit yield and whose collapse caused over $40 billion in losses to the crypto industry.

In April 2024, during a court case, a jury found Terraform Labs and its founder Do Kwon guilty of defrauding investors and securities fraud.

In South Korea, the entrepreneur faces numerous charges, including violations of capital markets law.

Currently, the issue of Kwon’s extradition to the US or South Korea is being resolved.

According to Binance, traders will be able to use BFUSD as collateral without “locking” their funds. Instead, holders will keep the asset in a UM-Wallet and accumulate daily airdrops sent to the UM Futures Wallet based on snapshots.

Users will have a limited BFUSD quota depending on their social rating on Binance — VIP level.

Previously, similar parallels with UST were drawn with USDe from Ethena Labs. At launch, the community questioned the viability of the “synthetic dollar,” partly due to potential yield inversion.

The stablecoin’s architecture is based on a delta-neutral trading and portfolio management strategy popular in TradFi.

This strategy is often used in the options market to manage risks associated with changes in the price of the underlying asset. It is a type of Cash-and-Carry trading and is considered safe under favorable conditions.

Back on August 5, amidst market turbulence, the redemption volume of the “synthetic dollar” by its issuer Ethena Labs exceeded $100 million. The token maintained its peg to the USD.