Binance Clears the Air on New Token Amid Comparisons to Terra’s Collapse

Binance has addressed concerns regarding its upcoming "BFUSD" token, clarifying that it is neither a stablecoin nor a product that has been launched yet.

The confusion arose after a recent post on X, which reported that Binance was preparing to introduce a stablecoin with an annual yield of 19.55%. This claim led many in the crypto community to compare the token to the now-defunct algorithmic stablecoin TerraClassicUSD (USTC), which collapsed in 2022.

Binance swiftly responded, emphasizing that BFUSD is not a stablecoin but rather an unreleased margin trading product designed to offer rewards.

In a clarification posted on X, Binance explained that BFUSD would allow traders to use it as collateral in futures trading without having to lock up their funds or stake it. Instead, users will hold the asset in a “UM wallet” and receive daily airdrops to their “UM Futures Wallet,” with the amount depending on their VIP status within the Binance platform.

Despite Binance’s explanation, many crypto users were quick to draw parallels to the Terra ecosystem’s downfall, particularly the high-yield promises made by the Anchor Protocol for its algorithmic stablecoin UST.

The collapse of UST, which once held an $18 billion market cap before its dramatic crash in May 2022, still lingers in the memory of many in the community. As a result, the mention of a high yield attached to a Binance product triggered flashbacks to that episode, with some commentators questioning if the yield was sustainable and what the source of such returns might be.