Binance, one of many world’s largest cryptocurrency exchanges, introduced on March 17 that it has changed the Binance USD (BUSD) holdings in its Secure Asset Fund for Users (SAFU) with TrueUSD (TUSD) and Tether (USDT). The transfer is available in response to Paxos’ latest 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 change 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 Trust Company introduced it might cease issuing new BUSD efficient Feb. 21 in accordance with the instructions of and in coordination with the New York Department of Financial Services. Days after reviews emerged that United States regulators had been scrutinizing Paxos and BUSD, Binance minted almost $50 million price of TUSD. The transaction befell on Feb. 16, in accordance with knowledge from Etherscan, and got here two days after Binance CEO Chanpeng Zhao talked about in a Feb. 14 Twitter Space that Binance would look to “diversify” its stablecoin holdings away from BUSD.
With the U.S. Securities and Exchange Commission additionally taking motion towards BUSD, some crypto group members have questioned whether or not stablecoins are the actual problem at hand or if it is truly about Binance, because the SEC did not take motion towards Paxos’ gold-backed stablecoin, Pax Gold (PAXG).
Stablecoins, similar to BUSD, TUSD, and USDT, are digital currencies designed to take care of a steady worth relative to a reference asset, such because the US greenback. They have develop into more and more in style lately as a method of facilitating transactions on cryptocurrency exchanges with out having to transform to fiat forex, which will be pricey and time-consuming.
However, stablecoins have additionally come below scrutiny from regulators because of considerations about their lack of transparency and potential to be used in illicit actions. The latest actions by the SEC and the New York Department of Financial Services towards 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 explicit asset. This seems to be the motivation behind Binance’s determination to exchange BUSD with TUSD and USDT in its SAFU fund.