Binance will stop supporting BUSD from Dec 15, 2023. Users can trade BUSD for $FDUSD without trading fees.
In a major development within the cryptocurrency sphere, Binance recently announced its decision to discontinue support for its BUSD stablecoin.
The exchange plans to gradually remove BUSD from spot and margin trading pairings, urging users to transition their BUSD holdings to alternative assets.
This calculated move by Binance signifies a major shift, compelling users to navigate changing trading pairings and explore other stablecoin options.
Regulatory Impact on BUSD and Binance: SEC Actions and NYDFS Directive
The decision, effective from December 15, 2023, is primarily attributed to regulatory pressures faced by Paxos, the issuer of BUSD. The regulatory measures the US Securities and Exchange Commission (SEC) took in February, which flagged BUSD as a potential unregistered security, influenced Binance's course of action.
Under the New York Department of Financial Services (NYDFS) directives, Paxos halted the BUSD issuance. Consequently, Binance discontinued support for its native stablecoin in response to increased regulatory scrutiny.
Paxos has assured its customers that BUSD will remain fully redeemable until at least February 2024, maintaining a 1:1 backing by the US dollar.
Phasing Out Process and Transition Details
Per prior communications, Binance will cease BUSD support from December 15, 2023. Users can trade or convert their BUSD balances to $FDUSD without incurring any trading fees.
Spot trading pairings incorporating the BUSD stablecoin are set to be delisted between December 11 and December 15. Additionally, future delistings will follow a different timeline, while spot-taking orders and Spot Trading Bot services will terminate on specified dates.
Commencing December 31, any remaining BUSD in user accounts will undergo an automatic conversion into FDUSD. However, users in specific jurisdictions will not undergo this conversion process at that time.
Background of BUSD and Its Drastic Market Shift
Introduced by Binance in 2019, BUSD emerged as a $16 billion stablecoin facilitated by Paxos, serving as the currency's issuer and custodian of fiat reserves. It gained status on Binance.com and other exchanges, offering direct purchase and redemption on the Paxos network.
The stablecoin journey witnessed a huge market valuation surge, reaching a pinnacle of over $23.3 billion in November 2022. However, BUSD faced a steep decline within a year, witnessing a staggering 92% drop, valued at around $1.7 billion.
Adapting to Regulatory Challenges
Alongside the discontinuation of BUSD support, Binance’s services, such as Earn, Card, Pay, and Gift Card, will undergo modifications. The firm has faced stringent actions from US authorities, notably following admissions of willful violations of the Bank Secrecy Act.
Changpeng Zhao, Binance's former CEO, resigned after the acknowledgement of these violations, leading the company to agree to pay an unprecedented $4 billion in fines.
Subsequently, Richard Teng assumed the CEO role, showing Binance's commitment to compliance and adaptability within the regulatory sphere.
Looking Ahead: Paxos and PYUSD
Meanwhile, Paxos has disclosed plans to collaborate with PayPal, aiming to introduce PYUSD, a new stablecoin backed by the US dollar.
As Binance navigates the regulatory landscape, this discontinuation of BUSD support represents a strategic shift, prompting users to transition while the company adapts to complying with regulations and industry dynamics.