Binance launches BFUSD stablecoin offering 19.55% APY

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As a seasoned analyst with years of experience navigating the turbulent waters of the crypto market, I must admit that Binance’s latest venture into stablecoins has piqued my interest – and not just because of the enticing 19.55% annual percentage yield on offer. However, my enthusiasm is tempered by a healthy dose of skepticism, given the challenges faced by their previous stablecoin, BUSD, in 2023.

Binance recently launched a new stablecoin, known as BFUSD, which offers a yearly return of 19.55%. This digital currency caters to cryptocurrency users who are interested in earning passive income.

20 million units make up the maximum amount of BFUSD in circulation, and this stablecoin functions while maintaining a collateralization level of 105.54%. Users can collect returns without having to commit their assets for staking or lock-up, as per Binance’s system.

Cryptocurrencies such as BFUSD are digital coins created with the purpose of keeping their worth consistent, usually tied to real-world currencies like the US dollar. These coins are frequently utilized for transactions, borrowing, and accruing interest within the realm of decentralized finance systems.

Based on what’s stated on Binance’s site, it appears that this stablecoin could serve as full collateral, making it an attractive choice. Yet, the source of the return and how sustainable it is are currently undefined.

Binance’s dive into stablecoins 

Back in the past, Binance experimented with a stablecoin named BUSD. However, this digital currency encountered considerable difficulties during the year of 2023.

Developed under the supervision of the New York Department of Financial Services, and initially issued by Paxos, the Binance USD (BUSD) was created to maintain a consistent value equal to one U.S. dollar. The backing for this digital currency is held in cash or U.S. government securities such as Treasuries.

Starting in February 2023, Paxos was directed by U.S. regulators, including the SEC, to halt the issuance of BUSD because there were concerns that it could potentially be categorized as an unregistered security, based on scrutiny from regulatory bodies.

As a result of this regulatory measure, the market value of BUSD decreased significantly, shrinking from more than $16 billion at the beginning of 2023 to less than $3 billion by the year’s end.

Due to the pause in new coin releases, Binance decided to channel its efforts towards other stablecoins such as USDT (Tether) and their latest addition, BFUSD. Although BUSD faced some difficulties, it continued to perform its role within the Binance system for trading and DeFi collateral purposes. However, the future of BUSD remained unclear.

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2024-11-19 14:12