- Following the order against Paxos to stop the issuance of BUSD by the New York Department of Financial Services (NYDFS), Binance CEO Changpeng Zhao assured that the exchange plans to maintain its support for Binance USD (BUSD).
- Binance will have to make “product adjustments”, having to stop using BUSD as its main trading pair for various tokens on the crypto exchange.
Paxos Trust Company is since 2019 the issuer of BUSD, this being the third largest stablecoin in the market according to its market capitalization, however, recently, the New York Department of Financial Services (NYDFS) issued an order against Paxos to stop the issuance of BUSD.
Consequently, Paxos public a press release in which he informed that, as of February 21, the company will “stop issuing new BUSD tokens”. The company also clarified that already issued BUSD tokens are fully backed and redeemable through Paxos Trust Companyat least until February 2024.
“Paxos will continue to manage all outstanding BUSD reserves, ensuring that all BUSD is always backed 1:1 with US dollar-denominated reserves held in remote bankruptcy accounts.”, the company clarified.
Evidently the news has generated a stir among members of the crypto community and, of course, the FUD (acronym for Fear, Uncertainty and Doubt) has spread rapidly. This has caused BUSD, designed to hold a 1:1 value to the US dollar, to fall to a valuation of $0.99. US against USDT.
CZ ensures funds are safe
The recent history of crypto disasters has caused any news to raise alerts among the crypto community, which is why, after the Paxos statement, Changpeng Zhao, better known as CZ and CEO of Binance, took to Twitter to assure the community that the funds are completely safe.
“BUSD is a stablecoin wholly owned and managed by Paxos.”, clarified CZ, and therefore emphasized in his Twitter thread that Paxos will continue to manage the BUSD reserves that have already been issued and will continue to manage the exchanges. He also stressed that Paxos made guarantees of the BUSD reserves.
What implications does it have?
But then what is going to happen to BUSD? Well, Changpeng Zhao explained that the market capitalization of BUSD will most likely decrease over time because many users will exchange their tokens for other stablecoins.
Yes, according to CZ, users will be able to migrate to other stablecoin tokens like USDT due to the enforcement action.
In fact, as can be seen in the image above, in the last 24 hours, the market capitalization of BUSD has already decreased by 1.2% according to CoinMarketCap.
In addition, The drop in the BUSD/USDT pair on Binance already suggests that traders have started to migrate from one stablecoin to another.
Changpeng Zhao also acknowledged that the move will cause Binance has to make “product adjustments”, having to stop using BUSD as its main trading pair for various tokens on the crypto exchange.
“Binance will continue to support BUSD for the foreseeable future. We anticipate users migrating to other stablecoins over time. And we will make product adjustments accordingly. for example, stop using BUSD as the main pair to trade, etc.”CZ explained.
At the regulatory level, the measure probably marks a before and after in terms of the development of the cryptocurrency industry, explains CZ. In this sense, he acknowledges that, given the regulatory uncertainty, Binance must carry out a deep review of other projects with the aim of reducing possible undue damage to users.
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