Binance, one of the leading crypto exchanges, recently made an important announcement regarding its BUSD stablecoin. The exchange revealed its decision to end support for BUSD, which comes after the stablecoin faced regulatory challenges. Binance has now initiated the process of discontinuing support for BUSD.
On September 14, Binance took to its official Twitter account to announce that it would start burning several Binance-pegged tokens. Out of the five tokens listed for burning, four were BUSD tokens on different blockchains.
According to the announcement, the Binance-pegged tokens would be burned on their respective blockchains. Subsequently, the exchange plans to release an equivalent amount of tokens that were initially used as collateral on their native networks.
The BUSD tokens that will be burned include BUSD on the Polygon (MATIC) network, BUSD on the Tron (TRX) network, BUSD on Binance Smart Chain (BSC), and BUSD on Binance Coin (BNB) network. Additionally, the exchange also revealed that TUSDOLD on BSC would be burned, making it the only token on the list that is not BUSD.
Related Post
The collateral for this process will be the equivalent of the Binance-pegged tokens that are burned. For example, if 1,000 BUSD on the MATIC network is burned, the exchange will release an equivalent amount on the MATIC network.
The BUSD stablecoin faced regulatory scrutiny earlier this year when the United States Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos, the issuer of BUSD. The SEC alleged that BUSD was an unregistered security and expressed its intention to pursue legal action.
Following the SEC’s move, the New York State Department of Financial Services (NYDFS) requested Paxos to stop printing new BUSD tokens. The NYDFS was concerned about Paxos’ relationship with Binance, which eventually led to Paxos severing ties with the crypto exchange.
Since regulators intervened, BUSD has experienced a decline in usage and market capitalization. Once among the top 10 cryptocurrencies by market cap, BUSD’s market capitalization now stands at $2.5 billion, making it the 26th largest cryptocurrency at the time of writing.
In response to the regulatory challenges, Binance announced its plans to completely end support for BUSD by 2024. Paxos also stated that it would stop all BUSD redemptions in February 2024, with Binance expected to withdraw support shortly after.
Despite the regulatory storm, BUSD has managed to maintain its dollar peg effectively. It continues to trade at a 1:1 parity with the United States dollar, with rare dips below $1.
The chart depicting BUSD’s market capitalization reveals the impact of the regulatory crackdown. It shows a noticeable decline in market capitalization since the regulatory challenges began.
As Binance begins the process of burning BUSD tokens and phasing out support for the stablecoin, it remains to be seen what impact this will have on the crypto market and whether it will open up new opportunities for other stablecoins to gain prominence.
