Another trouble for the apex crypto exchange after the Binance stablecoin was involved in many scandals and mismanagement, leading to its decline. Binance stablecoin BUSD has been in the news in recent years, and the latest about them is the mismanagement that caused the stablecoin to lose more than $2 billion of its value within one month. That's a huge number because many similar stablecoins had gone down the drain when they faced similar issues. Should crypto users be wary of BUSD?
The circulating supply of the Binance stablecoin fell to $15.4 billion on Wednesday, which made it lose about $1 billion within a week and $2 billion within one month. According to data provided by the crypto price tracker CoinDesk, the reduced BUSD price and value resulted from the issues it has with its asset management. Early December last year, the stablecoin had declined to $22 billion in circulating supply, and now it has fallen further to $15.4 billion.
Binance was involved in a massive FUD, which made users anxious, leading them to scramble and withdraw some of their funds within the crypto exchange. This was one of the major factors that caused the decline in BUSD value last December.
What's Causing BUSD Latest Decline?
BUSD is a stablecoin developed by the New York-based fintech firm Paxos Trust but under the brand protection of Binance. Cash and the US treasury reserves bill back the stablecoin. BUSD serves as a bridge when converting fiat to digital currency, facilitating the buying and selling of cryptocurrencies.
The latest decline that is being observed is due to issues coming from asset management around Binance-peg tokens. Binance-peg tokens are exchange-wrapped token derivatives. Earlier this year, a blockchain research firm ChainArgos discovered that Binance has been having problems with the way tokens directly under them are being managed.
The blockchain research firm Chain Argos found that between 2020 and 2021, Binance stablecoin BUSD was not fully backed by the US reserves as they claimed. This was a huge blow for the apex crypto exchange, but they have acknowledged the news and say they have fixed the issues.
After the crypto exchange reportedly cleared up this mess, Binance found itself barricaded by another hurdle when Bloomberg reported that it had made another mistake of mixing customer funds with the collateral of Binance-peg tokens. Binance’s banking partner Signature Bank has also halted transfers of less than $100,000 from February 1st as a control procedure for their current problems. Could this be the next FTX?
These issues have caused the BUSD price and value to fall drastically. There has been tough competition among stablecoins, and the issue BUSD is experiencing has made it go down the pecking order of stablecoins. Within one month, Binance stablecoin lost approximately 11.3% of its market capitalization. In comparison, data provided by DefiLama shows that BUSD competitors, USDT gained about 1.3%, and USDC dropped just 1.9%, all within the space of the same month. Binance must fix the numerous issues they are having or risk being the next FTX of the crypto industry.