Binance recently announced that it will ”gradually” end support for its native BUSD stablecoin. The world’s top exchange will remove the stablecoin from spot and margin trading pairs. Binance has asked users to convert their BUSD holdings into other available assets on the platform before February 2024. Revealing the reason behind its decision, Binance told users,
”As Paxos has halted minting of new BUSD, Binance will gradually cease support for BUSD products.”
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In Q1 2023, the New York Department of Financial Services ordered BUSD issuer, Paxos, to stop creating more BUSD tokens. At that time, on the news of the development, Binance’s stablecoin lost its peg and dropped below the $1 mark, to $0.9998. Tether, on the other hand, was priced at $1.001, indicating that investors were likely diverting their funds towards USDT from BUSD. At press time, however, the situation was different. All top stablecoins, including BUSD, remained committed to their $1 peg. Several members of the community have expressed their dejection over Binance’s latest call. A particular user recently posted on X [formerly Twitter],
“It’s sad 🙁 I like BUSD more than USDT.”
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State of BUSD
In Q3 2022, Binance de-listed all USD Coin [USDC]-denominated trading pairs. Right after that, it officially started auto-converting deposits into the exchange’s native stablecoin, BUSD. The exchange took this measure to enhance liquidity and capital efficiency for users. Soon after, BUSD’s global market share, when compared against USDT and USDC, increased from 21% to 26%. However, the tables turned in 2023, and by March, BUSD’s market share had dropped by nearly 10% from its peak. Tether’s share rose by around 8%.
On the market cap front, BUSD has consistently shrunk in value. In November last year, BUSD’s aggregate valuation was above $23 million. However now, it is down to $3 billion. As a result, its market cap dominance has shrunk to a mere 0.275%.
Thus, in the face of shrinking market share and fading dominance, ending the support of the stablecoin could end up working out in Binance’s favor. Owing to numerous allegations, the exchange is already on the regulatory radar of multiple agencies. Thus, at this stage, it can instead focus on other avenues and try to fortify its presence in the crypto space.