Binance crypto exchange announced in late August that it is moving to end support for its beloved BUSD stablecoin. This move comes amid the stablecoin’s run-in with regulators, leading to a halt in its production. And now, the exchange has started moving to begin the end of support for the stablecoin.
Binance Starts Burning Tokens
Binance took to its official X (formerly Twitter) account on Thursday, September 14, to announce that it would begin burning a number of Binance-pegged tokens. Among the five tokens listed to be burned, four were BUSD tokens across different blockchains.
According to the announcement, the Binance-pegged tokens would be burned on the listed blockchains, and then the exchange would release the equivalent amount of tokens that were initially used as collateral on their native networks.
Later today, #Binance will burn a number of idle Binance-pegged tokens.
The equivalent amount of tokens on their native networks, which were used as collateral, will then be released.
— Binance (@binance) September 14, 2023
The BUSD tokens listed across four networks include BUSD on the Polygon (MATIC) network, BUSD on the Tron (TRX) network, BUSD on BSC, and BUSD (BNB). In addition to these, the exchange also revealed that the TUSDOLD on BSC would be burned as well, making it the only token on this list that is not BUSD.
The collateral in this case will be the equivalent of the Binance-pegged tokens that are burned. So if 1,000 BUSD on the MATIC network is burned, then the equivalent on the native blockchain will be released by the exchange.
Fire In The BUSD Camp
The BUSD stablecoin first came under fire in early 2023 when the United States Securities and Exchange Commission (SEC) issued a Wells Notice to issuer Paxos alleging that the stablecoin was an unregistered security. The regulator, through this, made its intention to pursue legal action known.
Following the move by the SEC, the New York State Department of Financial Services (NYDFS) asked the issuer to stop printing new tokens. The NYDFS’s concern mainly bordered on Paxos’ relationship with Binance, and eventually, the BUSD issuer decided to cut ties with the crypto exchange.
Since the initial move by regulators, the stablecoin has suffered in terms of usage and market cap. The stablecoin which was once a top 10 crypto by market cap has since seen its market cap decline to $2.5 billion, making it the 26-largest cryptocurrency as of the time of this writing.
Binance has also announced plans to stop offering support for the stablecoin completely by 2024. Paxos also revealed that it will cease all BUSD redemptions in February 2024, and Binance’s complete withdrawal is expected to come shortly after this.
Nevertheless, the stablecoin continues to maintain its dollar peg quite well. It is still trading at a 1:1 parity with the United States dollar and has rarely dipped below $1 amid the regulatory storm.
Market cap suffers amid regulatory crackdown | Source: Market Cap BUSD on Tradingview.com
Featured image from Zipmex, chart from Tradingview.com