Binance, the world’s largest cryptocurrency exchange, announced that it will stop offering BUSD borrowing and staking services by October 25, 2023. This decision is part of the exchange’s plan to phase out all BUSD-related products by 2024, following regulatory pressure from the U.S. authorities.
BUSD is a stablecoin pegged to the U.S. dollar, launched by Binance in partnership with Paxos, a New York-based fintech firm. Paxos is the issuer and custodian of BUSD and also provides the redemption service for users who want to convert their BUSD to U.S. cash or Treasuries.
Binance and Paxos Parted Ways
However, Paxos recently decided to end its association with Binance, citing legal issues between the exchange and the U.S. Securities and Exchange Commission (SEC). The SEC has accused Binance of offering unregistered securities through its BUSD stablecoin, which could violate federal securities laws.
As a result, Paxos has suspended the minting of the new BUSD and announced that it will stop the redemption service by February 2024. Paxos has also urged Binance to comply with U.S. regulations and cooperate with the SEC’s investigation.
Before its discontinuation, BUSD was a major player in the stablecoin market, boasting a record market cap of $23 billion in November 2022. However, its market cap has since dwindled to $2.23 billion as of the current reporting period.
Binance has responded by gradually reducing its BUSD services, starting with the withdrawal suspension on multiple blockchain networks last month. The exchange has also encouraged its users to switch their BUSD assets to other stablecoins, such as First Digital USD (FDUSD), a new stablecoin launched by First Digital Group, a Hong Kong-based trust company.
Binance has stated that it will continue to support its users during this transition period and provide them with alternative options for their crypto needs. The exchange has also reiterated its commitment to work with regulators and foster a healthy and sustainable crypto ecosystem.