The world’s largest crypto exchange, Binance, has launched its controversial reward-bearing margin asset, BFUSD. This asset offers futures traders an opportunity to earn up to 38% passive revenue while holding the token.

According to a press release shared with CryptoPotato, traders can purchase BFUSD from 02:00 UTC on November 27. From November 27 to December 26, Binance will hold a promotional campaign to mark the launch of BFUSD, charging zero fees on the token purchases and allowing users to share 100,000 Tether (USDT) in bonus annual percentage yield (APY).

Binance Launches BFUSD

Information on the Binance website reveals that BFUSD offers a Base APY of 29.18% and a Boosted APY of 38.98%. The Base APY applies to users holding the token without trading futures, while the Boosted APY is for those engaging in USDⓈ-M Futures trading activity. The token has a supply of 120 million and a collateral value ratio of 101.32%.

Binance users can buy and redeem BFUSD for USDT at 1:1, excluding transaction fees. The crypto exchange will calculate and publish two reward rates daily by taking into account the lowest BFUSD balance recorded in the user’s account from hourly snapshots taken throughout the day. The lowest hourly snapshot determines the daily BFUSD balance.

The platform will fund the rewards with passive income from staking activities and funding fees collected by delta-hedging crypto assets between spot and futures markets. A significant part of the income will go to users daily in the form of USDT, while the remaining portion will go to a dedicated BFUSD Reserve Fund. Binance has already kickstarted this reserve fund with 1.7 million USDT, aiming to protect BFUSD from negative funding rates.

Jeff Li, Binance’s vice president of product, said: “As the global leader in crypto derivatives products, we are always looking to innovate for our users and provide them with more utility on our platform. BFUSD is a user-friendly and exciting addition to our wide range of offerings, enabling users to enjoy daily rewards when they trade futures.”

BFUSD Reliability Concerns

Interestingly, Binance claims the reward rates of BFUSD will never go below zero. The crypto exchange has also clarified that BFUSD is not a stablecoin but an asset that can be used as a margin for futures trading on the platform.

Regardless, market participants have expressed skepticism about BFUSD’s reliability due to its high APY, comparing it to the collapsed algorithmic stablecoin TerraUSD.