Binance has unveiled plans to gradually withdraw its support for the BUSD stablecoin. The decision aligns with Paxos’ recent suspension of new BUSD issuance and comes amidst growing regulatory pressures, particularly from the United States.
As Paxos has halted minting of new BUSD, #Binance will now gradually remove support for the stablecoin on our platform.
BUSD will always remain backed 1:1 by USD, and we continue to support a wide range of other stablecoins.
Find more details below.
— Binance (@binance) August 31, 2023
In an BUSD released on August 31st, Binance communicated its intention to discontinue the backing of BUSD, a stablecoin that has been pegged 1:1 to the US dollar. As a response to Paxos’ suspension of new BUSD minting, Binance will wind down its support for BUSD products, leading users to seek alternatives for their stablecoin holdings.
Meanwhile, the company has emphasized that the value of BUSD will continue to be upheld by its USD equivalent.
Binance Lays Out Transition Timetable
The cryptocurrency exchange giant has outlined a comprehensive timeline for the gradual cessation of BUSD support. Starting September 7th, BUSD borrowings on the Cross Margin will be suspended. Subsequently, as of October 19th, Cross Margin and Portfolio Margin users will no longer be allowed to provide additional BUSD tokens as collateral in the Cross Margin Wallet. However, users can still use other tokens for this purpose.
While the stablecoin will be delisted as a loanable and collateral asset from the exchange’s Loans and VIP Loan on different dates, existing loan and collateral positions will not be affected this time. Binance says,
“A separate announcement on the closure of outstanding BUSD loan and collateral positions will be released.”
To facilitate a seamless transition, Binance has encouraged BUSD holders to convert their holdings into other stablecoins, such as Tether (USDT), Circle (USDC), FDUSD, and TUSD, prior to February 2024. Remarkably, Binance has reassured users that this conversion process can be executed on a 1:1 basis against the US dollar, whenever they opt to do so.
Navigating Regulatory Complexities
The decision to phase out BUSD support arrives amidst a challenging regulatory landscape stemming from the actions of the United States government and regulatory agencies.
Binance finds itself navigating through a complex regulatory landscape, underscored by allegations from the United States Securities and Exchange Commission (SEC), asserting that Binance Coin (BNB), the platform’s native cryptocurrency, qualifies as a security.
This contention has resulted in allegations of unauthorized operations within US jurisdictions. Additionally, the exchange has confronted accusations of involvement in money laundering activities and the listing of digital assets characterized as unregistered securities.
Also, recall that the New York Department of Financial Services (NYDFS) ordered Paxos to cease issuing BUSD on February 13, 2023, citing concerns about Paxos’s relationship with Binance.
The NYDFS’s order was primarily prompted by concerns regarding Paxos’ management of the reserves supporting the BUSD. Similarly, the SEC issued a Wells Notice to Paxos, claiming that the BUSD stablecoin is an unregistered security.
