Nikolas Sargeant
Cryptocurrency exchange Binance has moved to address mounting concerns over its upcoming BFUSD product, emphasizing that it is not a stablecoin after crypto users drew parallels with Terra's infamous collapse.
The clarification came after crypto news aggregator Zoomerfied posted on X on November 17 that Binance would launch a stablecoin offering a 19.55% annual yield. The announcement quickly sparked anxiety among crypto users, who drew immediate comparisons to Terraform Labs' failed algorithmic stablecoin project.
"BFUSD is not yet launched. To be clear, it is not a stablecoin but a reward-bearing margin asset for futures trading," Binance Customer Support stated in response to the growing concerns.
According to Binance's official launch page, BFUSD will function as collateral for trading without requiring users to stake or lock up their funds. The product will operate through a "UM wallet" system, with daily reward airdrops distributed to users' "UM Futures Wallet" based on regular snapshots. User access to BFUSD will be limited by their "VIP level" - a social ranking within the Binance ecosystem.
The initial announcement triggered immediate flashbacks to Do Kwon's Terra ecosystem collapse, where the Anchor protocol had promised similar 20% yields on UST deposits. Pseudonymous trader RunnerXBT voiced the community's anxiety, asking, "How...how much did Anchor... did.... Yield?" before adding, "Can we not?"
The Terra comparison is particularly poignant given the catastrophic events of May 2022, when the $18-billion USTC stablecoin crashed from its $1 peg to below $0.01 in less than a month. The collapse triggered a DeFi bank run, with LUNA, its companion stabilizing asset, plummeting from $80 to below $0.001 within a week.
Community reaction remained skeptical, with users questioning the source of the promised yields. "Are we the yield?" one user pointedly asked, while veteran Bitcoin advocate Jameson Lopp expressed visible concern about the announcement.
