Other Technology | September 8, 2023
Binance has announced its plan to gradually stop supporting BUSD, its stablecoin. This news isn’t surprising, given the increasing regulatory pressures faced by the cryptocurrency exchange led by Changpeng Zhao. The move is a direct result of the United States’ block on Paxos, the company responsible for developing and maintaining the token, from issuing it.
In a new post on its website, Binance encouraged users to convert their BUSD funds to other stablecoins before February 2024. Starting from that month, the cryptocurrency, whose value is pegged to the US dollar, will no longer be available on the exchange platform.
However, many of the services and features that Binance offers with BUSD will be phased out long before that deadline. In fact, the company has published a roadmap outlining the steps to be taken, and several functions will begin to be discontinued in the coming weeks.
One of Binance’s first measures will take effect on September 6, when it will no longer be possible to borrow in BUSD. One day later, withdrawals of the stablecoin via networks like Polygon, Tron, Optimism, Avalanche, and BNB Chain will be canceled. Deposits of the token through these networks will still remain active, as will deposits and withdrawals of BUSD via Ethereum, although the timeframe for this is still unknown.
Furthermore, Binance stated that it plans to gradually remove BUSD as a trading pair for other cryptocurrencies in its Spot and Margin wallets. Additionally, starting from September 30, it will no longer be usable with Binance Pay, nor will it be available for creating gift cards.
Binance also plans to discontinue more BUSD-related services between October and December. These include those offered through Earn, its investment solutions. Furthermore, the cryptocurrency exchange plans to phase out all futures contracts linked to the token, although a specific date has not been specified.
It is evident, however, that Changpeng Zhao’s team is preparing the ground for the stablecoin to disappear definitively at the beginning of next year. And this decision is far from arbitrary. Recall that when the United States blocked the issuance of BUSD, Paxos confirmed that it would continue to provide support and accept swaps for the tokens in circulation until February 2024.
From that date onwards, Binance will be powerless to keep BUSD alive. Let’s not forget that, although it carries the exchange’s name, the token is the sole property of Paxos Trust, a company regulated by the New York Department of Financial Services. Last February, the U.S. Securities and Exchange Commission (SEC) threatened to sue Paxos for considering the crypto asset an unregistered security.
Thus, it had no choice but to comply with the order to suspend the issuance of new BUSD tokens and sever its ties with Binance. This case did not go unnoticed in the world of cryptocurrencies, as BUSD was the third most used stablecoin in the world, only behind USDT and USDC.
BUSD’s market capitalization once exceeded $16 billion. However, the U.S. block led many users to distance themselves from this asset and opt for other “cryptodollars.” Today, its market cap barely exceeds $3 billion, placing it outside the top 20 most valuable cryptocurrencies worldwide.
February 2024 will be the time for the final farewell to BUSD, but Binance has already begun a lengthy farewell process. Is there a possibility that the stable cryptocurrency could lose its peg to the dollar in this process? For now, it’s impossible to say, although if it does happen, it may not take anyone by surprise.
Binance encourages its customers not to waste time and even recommends converting their BUSD holdings to FDUSD, a stablecoin that appeared on the scene not long ago and is already generating controversy.