The Binance-backed stablecoin BUSD, minted by Paxos, is making waves after the New York Department of Financial Services has restricted new token issuance. Losing price stability, BUSD directed altcoin investors to other alternatives.
BUSD loses dollar peg: Altcoin investors migrate to other stablecoins
Binance’s dollar-pegged stablecoin, BUSD, has been volatile following legal action against its manufacturer, Paxos Trust Co. BUSD, designed to be pegged at $1:1, fell as low as 0.9950 against USDT earlier on Monday, according to data provided by Kaiko.
The decline in the BUSD/USDT pair on Binance indicates that some traders are transferring funds to Tether. According to Clara Medalie, Kaiko’s director of research, “Actually, there is no way to grow the stablecoin by stopping the production of BUSD. BUSD trading pairs will continue to be supported by Binance, but traders will gradually begin to switch to other stablecoins, which could lead to a discount on BUSD.”
That's not bullish, I'm flat, transferred $BUSD to $USDT. https://t.co/43Hq8mza6X
— 0xGanymede (@ganymede_0x) February 13, 2023
Binance CEO tweeted that altcoin investors are starting to switch to other stablecoins
CEO Changpeng “CZ” Zhao said during the day that users are starting to switch to other stablecoins. Binance plans to take further steps, including discontinuing BUSD as the main pair for altcoin transactions.
7/ Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.
— CZ 🔶 BNB (@cz_binance) February 13, 2023
As a result, Binance USD (BUSD) is dependent on Tether (USDT). The market cap of BUSD fell due to uncertainty, while the market cap of USDT rose to $68.58 billion on February 13. Meanwhile, Circle’s USD Coin (USDC) market cap shows no upward movement, suggesting that conversions are mostly made to USDT.
The data also revealed that USDT is about 14% of 3pool’s TVL on Curve, with a TVL of $537 million, the lowest since April 2022. In the last 24 hours, Curve 3pool has generated $242 million in trading volume with a liquidity utilization of 45%.
Paxos will stop printing BUSD from this date
The first wealth management company founded in New York announced this morning that it will end its cooperation with Binance for the production of new BUSD. The decision comes after US regulator NYDFS ordered Paxos to stop issuing new BUSD tokens, citing anomalies in the process. In response to this, a number of DeFi startups, notably Aave, have decided to put an end to the BUSD-based lending market. This morning Paxos announced that it will stop issuing new BUSD from February 21:
1/ This morning, Paxos announced it will halt minting new #BUSD tokens effective February 21. Read the full press release from Paxos here: https://t.co/jXZY1ak8DR
— Paxos (@PaxosGlobal) February 13, 2023
What projects are next?
Other leading DeFi platforms are expected to take a similar approach due to their close relationship with the BUSD stablecoin. Pancake Swap, Balancer, Injective, Uma, and Dexe are some of the other lending protocols that fall into this category.
Paxos’ order to stop printing BUSD comes amid a series of regulatory enforcement measures taken by the US regulator. The move was reportedly the result of a coordinated effort between the NYDFS and the SEC and other US regulators.
As you follow on Kriptokoin.com, the SEC has started to take action against staking cryptocurrencies in the USA. Central exchange Kraken was recently ordered to pay a $30 million fine and cease all staking services for its US retail customers.
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