The world’s largest crypto exchange has decided to ”gradually” end support for its native $BUSD stablecoin by Q1 2024. This comes on the back of Paxos’ decision to halt the minting of new $BUSD tokens due to regulatory issues, which has been effective since 21 February.
On 31 August, Binance revealed its intentions to delist $BUSD spot and margin trading pairs. A day before this, the company had said that it would remove nine cross-margin and isolated margin $BUSD trading pairs at 2023-09-07 06:00 (UTC). The list includes pairs like HARD/BUSD, AMB/BUSD, and IOST/BUSD.
In its most recent announcement, users were encouraged to convert their $BUSD assets into other available assets on Binance prior to February 2024. They have been given the option to either trade their $BUSD balances for $FDUSD at zero trading fees or convert their $BUSD balances to $FDUSD at 1:1.
However, this would not affect $BUSD (ERC-20) token withdrawals and deposits on the Ethereum network, which the exchange will continue to support until further notice. It also assured users that $BUSD will always be backed 1:1 by $USD.
Back in Q1 2023, the New York Department of Financial Services (NYDFS) had ordered Paxos to stop creating more $BUSD tokens. On 13 February 2023, the $BUSD issuer announced it will end its relationship with Binance for its branded stablecoin.
However, it also stated that Paxos Trust, which is a regulated institution overseen by the NYDFS and audited by a top-four accounting firm, will continue to manage $BUSD dollar reserves. The announcement had reiterated Paxos’ commitment to prioritising the safety of its customers’ assets. Assuring them further, it said-
“$BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024. New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar ($USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust.”
Following the news of the recent development, Binance’s stablecoin failed to maintain its peg, dropping below the $1 mark. At the time of writing, $BUSD was changing hands for $0.9998, down by almost 1% as the coin traded in the red.
Back in 2022, Binance had auto-converted deposits into the exchange’s native stablecoin, $BUSD after delisting all USD Coin- ($USD) denominated trading pairs in the year’s third quarter. The move was aimed at enhancing liquidity and capital efficiency for users, which worked out in its favour as $BUSD’s global market share rose significantly.
However, by March 2023, the stablecoin’s market share dropped by nearly 10% from its peak. Its market capitalisation has also consistently shrunk in value. This figure, which stood at $23 million in November last year, is now down to $3 billion.
In this background, talks about the crypto exchange behemoth’s latest move being part of a much larger plan to stop $BUSD in 2024 also made rounds as analysts questioned the stablecoin’s shrinking market share and fading dominance.
Binance has also been in the hot seat, facing scrutiny from regulators all around the world. In June, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against crypto exchange giant, Binance Holdings Limited, alongside BAM Trading Services Inc., BAM Management US Holdings Inc., and the company’s CEO Changpeng Zhao, alleging a significant breach of federal securities laws.
Recently, the SEC took its next step in the lawsuit by filing a sealed motion requesting permission to submit documents under seal. If granted, this move will allow the SEC to file sensitive or confidential information while keeping it away from the eyes of the public.