Binance to Halt Support for BUSD Stablecoin in December
Binance exchange has decided to halt support for BUSD stablecoin. On this account, the trading platform has notified the users that all BUSD reserves will be automatically converted into First Digital USD. The platform has set a timeline of 31st December as the final day for BUSD reserve holders.
The firm announced that it will halt support for BUSD and related products from 15th December. The decision was confirmed when Paxos reported that it was halting the issuance of new Binance USD coins. In a notification issued on 29th November, Binance informed its users that they would be able to withdraw or convert their BUSD reserves before 15th December.
Binance trading platform will seize all BUSD reserves. At the same time, the current holdings will be exchanged with First Digital USD (FDUSD). Binance undertook a surprising decision to halt support for its native stablecoin. The firm initially noted that it will gradually halt support for the stablecoin until February 2024.
The plan was to halt borrowing and lending services for BUSD starting in October. In February this year, SEC added BUSD in the list of cryptocurrencies recorded as unregistered securities.
Regulators Issue a Wells Notice to Paxos for BUSD
Securities and Exchange Commission took action against BUSD by notifying stablecoin issuer Paxos at the start of the ongoing year. After a while, The New York Department of Financial Services offered Paxos to stop issuing BUSD as well. On 21st November, legal authorities signed an agreement with Binance CEO CZ to sign a $4.3 billion settlement.
At the same time, CZ also stepped down from his position as CEO as part of the agreement with financial regulators. The trading platform has promoted, regional market head Richard Teng as the new CE of Binance.
BUSD had the biggest market cap among stablecoins reaching $23.3 billion at its height in 2022. However, at press time the market cap of BUSD is around $1.7 billion declining by 92% during the 12 months. Crypto report Amy Castor issued a statement in March that indicates that the crackdown against BUSD is part of a bigger regulatory scrutiny for the DeFi sector.
She opines that authorities can set their sight on Tether next as one of the most popular stablecoin alternatives. She further claimed that regulators have cracked down on BUSD since it was an integral part of Binance.
The Impact of Regulatory Crackdown on BUSD Stablecoin
Castor noted in her report that Binance auto-coverted USD reserves into BUSD. However, with the stablecoin getting delisted more investors are likely to shift their holdings into USDT. Data reports from CoinsMarketCap indicate that during Sep 2022 and Feb 2023 a massive amount of investors redeemed stablecoin reserves.
Analysts have attributed the shift to factors such as lack of transparency, lack of third-party audits, and regulatory strain with Treasury.
On the other hand, Tether and Bitfinex have decided to drop opposition to FOIL or Freedom of Information Law. A host of media outlets brought the charges against the crypto firms in New York. Blockchain intelligence Arkham reported that total Tether supply was incremented by 4.5 billion in November.
Meanwhile, Wally Adeyemo deputy secretary of Treasury recently issued a statement stating that stablecoin issuers hailing from outside of US territory should be halted to prevent terrorist abuse.
