Binance Clarifies BFUSD Isn’t a Stablecoin Amid Concerns and Comparisons to Terra

Binance has addressed concerns surrounding its upcoming BFUSD asset, clarifying that it is not a stablecoin and will not operate in the same way as traditional stablecoins. The clarification comes after crypto users on X (formerly Twitter) raised alarms about the promise of high yields attached to the asset, drawing comparisons to the collapse of Terraform Labs' algorithmic stablecoin, TerraUSD (UST), and its associated protocol Anchor.

On November 17, a post from crypto news aggregator Zoomerfied suggested that Binance would soon launch a stablecoin, BFUSD, offering an annual yield of 19.55%. This led many users to recall the failed TerraUSD, which also promised high yields and eventually collapsed in May 2022, dragging down the Terra ecosystem in one of the biggest crashes in crypto history.

In response to growing concerns, Binance clarified that BFUSD is not yet launched and is not a stablecoin. The asset is described as a reward-bearing margin product intended for futures trading. According to Binance Customer Support on X, BFUSD will allow users to earn daily airdrops based on their social ranking and trading activity on the platform. These airdrops will be deposited into their “UM Futures Wallet” from their “UM Wallet,” with users’ access to BFUSD determined by their “VIP level” on Binance.

Before Binance’s clarification, several crypto users immediately drew comparisons to the 20% yield offered by the now-defunct TerraUSD stablecoin and its Anchor protocol. "How...how much did Anchor... did.... Yield?" asked pseudonymous trader RunnerXBT, referencing the unsustainable yield offered by Terra's algorithmic stablecoin before its collapse. "Can we not?" he added, signaling his concern over the potential risks.

In May 2022, the USTC stablecoin lost its peg to the dollar, plummeting from $1 to less than $0.01 in just a few days, triggering a massive sell-off in the broader Terra ecosystem. The Terra project’s native token, LUNA, also crashed, falling from around $80 to nearly worthless in a matter of days.

Binance’s clarification appears to have been necessary, as many users, like one who asked "Are we the yield?" seemed to worry that the high yield promises could mask hidden risks. The post also caught the attention of prominent Bitcoin advocate Jameson Lopp, who expressed skepticism over the high-yield promises and the potential for another "yield farming" debacle.

While Binance maintains that BFUSD is not a stablecoin and not yet available, the crypto community remains cautious, wary of repeating the mistakes made with TerraUSD and other failed yield-based