What effect does the stoppage of Binance dollar activity have on the stablecoin market?
Paxos, the issuer and multiplier of the Binance Dollar (BUSD) stablecoin, is under investigation by US regulatory bodies and has been asked to stop supporting and multiplying this stablecoin. Analysts of the digital currency world are trying to predict the impact of this event on the stablecoin market and the overall crypto space.
According to Valx and quoted by Crypto Globe, Pexos announced yesterday (February 14) that it will end its cooperation with the Binance exchange for the creation of the Binance Dollar (BUSD) stablecoin from February 21, 2023.
Pexos added that it will stop issuing new Binance dollar tokens at the order of the New York Financial Services Department (NYFSD) and in order to cooperate with this entity. Paxos Trust, which operates under the supervision of the Financial Supervisory Authority (NYFSD) and is audited by one of the four largest traditional auditing firms in the world, will continue to manage the financial backing of the existing BUSD tokens.
Pexos added in this regard:
All available BUSD stablecoin tokens minted by Paxos Trust are backed 1-to-1 with USD, held in separate limited liability accounts.
According to Pexos, the Binance Dollar will be fully supported by the company until at least February 2024, and new and former customers of the company will be able to convert their BUSD balances to US dollars or Pexos Dollars (USDP) – Pexos’ other stablecoin. which independently propagates it – transform it.
Clara Medalie, the director of Kaiko’s research department, discussed this in an interview with Bloomberg TV. According to Medali, considering that most of the use of BUSD is limited to the Binance exchange and its Smart Chain network and has little use in other exchanges, the NYFDS order can be considered more as an attack on Binance and not stablecoins.
He added that Binance had made a lot of effort to market this stablecoin and now 35% of the total trading volume of this exchange is done with the BUSD pair. This figure was 20% at the beginning of the year. He mentioned the practical role of stablecoins in the DeFi field and considered this the reason for Binance’s insistence on having its own stablecoin.
Following the actions of the New York Department of Financial Services, Binance will no longer have this leverage and the centralized exchange market will be in the hands of Tether (USDT). Tether is currently on one side of most digital asset exchanges on centralized exchanges. Medali noted that without BUSD, all risk is now concentrated in one centralized actor called Tether, which is never a good thing.
What is the effect of the suspension of the Binance dollar activity on the stablecoin market? The first time in the blog Valx. appeared.