Binance, one of many world’s largest cryptocurrency exchanges, introduced on March 17 that it has changed the Binance USD (BUSD) holdings in its Safe Asset Fund for Customers (SAFU) with TrueUSD (TUSD) and Tether (USDT). The transfer is available in response to Paxos’ current transfer to cease minting new BUSD, which has led to the asset’s market capitalization falling. SAFU is an emergency insurance coverage fund established by Binance in July 2018 to guard customers’ funds in case of safety breaches or different unexpected occasions.
Binance dedicated a share of buying and selling charges to develop the fund, which was valued at $1 billion as of Jan. 29, 2022. SAFU’s wallets initially consisted of BNB (BNB), Bitcoin (BTC), and Binance USD, which has now been changed by TUSD and USDT. Binance assured customers that the change wouldn’t impression them, their funds would proceed to be held in publicly verifiable addresses, and BUSD would proceed to be supported. The alternate added that it might intently monitor the fund to make sure that it stays sufficiently capitalized and high it up periodically as obligatory utilizing its personal funds.
On Feb. 13, BUSD issuer Paxos Belief Firm introduced it might cease issuing new BUSD efficient Feb. 21 in accordance with the instructions of and in coordination with the New York Division of Monetary Companies. Days after experiences emerged that United States regulators have been scrutinizing Paxos and BUSD, Binance minted practically $50 million price of TUSD. The transaction occurred on Feb. 16, based on information from Etherscan, and got here two days after Binance CEO Chanpeng Zhao talked about in a Feb. 14 Twitter Area that Binance would look to “diversify” its stablecoin holdings away from BUSD.
With the U.S. Securities and Change Fee additionally taking motion in opposition to BUSD, some crypto group members have questioned whether or not stablecoins are the actual difficulty at hand or if it is really about Binance, because the SEC did not take motion in opposition to Paxos’ gold-backed stablecoin, Pax Gold (PAXG).
Stablecoins, reminiscent of BUSD, TUSD, and USDT, are digital currencies designed to take care of a secure worth relative to a reference asset, such because the US greenback. They’ve change into more and more standard in recent times as a way of facilitating transactions on cryptocurrency exchanges with out having to transform to fiat foreign money, which could be pricey and time-consuming.
Nonetheless, stablecoins have additionally come underneath scrutiny from regulators attributable to considerations about their lack of transparency and potential to be used in illicit actions. The current actions by the SEC and the New York Division of Monetary Companies in opposition to BUSD and Paxos are a part of a wider crackdown on stablecoins and cryptocurrency extra broadly.
In response, cryptocurrency exchanges and different market members wish to diversify their stablecoin holdings to scale back their publicity to anyone specific asset. This seems to be the motivation behind Binance’s resolution to switch BUSD with TUSD and USDT in its SAFU fund.