In a significant development, Binance, a prominent cryptocurrency exchange, has announced the discontinuation of support for its native stablecoin, Binance USD (BUSD), while simultaneously promoting a newly launched stablecoin.
Earlier, Paxos had disclosed plans to halt support for Binance's stablecoin by February 2024. Now, Binance has confirmed its decision to align with Paxos and end BUSD support by the same date.
Binance is encouraging its users who hold Binance USD (BUSD) stablecoin assets to transition to a recently introduced stablecoin. This move is part of Binance's strategy to phase out its support for BUSD.
On August 31, Binance issued an official statement confirming earlier rumors about the gradual withdrawal of BUSD support. This decision coincides with Paxos' intention to discontinue the redemption of BUSD by the same timeline.
The formal announcement from Binance followed user reports sharing images of notifications received through the Binance mobile app. These notifications informed users about the upcoming termination of BUSD support.
In their official communication, Binance has advised BUSD holders to consider either trading or transferring their BUSD holdings to First Digital USD (FDUSD), a stablecoin introduced by Hong Kong-based trust firm First Digital Group in June. This stablecoin was initially listed on Binance towards the end of July.
Binance is further encouraging the migration from BUSD to FDUSD by facilitating fee-free trades and conversions between these two stablecoins. As a precursor to this move, Binance eliminated eight trading pairs involving BUSD on August 30. Notably, Binance has historically promoted BUSD by offering zero-fee trading pairs. For instance, they had waived trading fees for FDUSD pairs involving major cryptocurrencies like Bitcoin (BTC), currently valued at $27,241, and Ether (ETH).
The decision by Binance to terminate BUSD support appears to be a response to mounting regulatory pressures. On February 13, the U.S. Securities and Exchange Commission (SEC) conveyed to Paxos, through a Wells notice, that BUSD might potentially be categorized as an unregistered security. Simultaneously, the New York Department of Financial Services directed Paxos to halt the issuance of BUSD. This combined regulatory scrutiny likely played a pivotal role in Binance's determination to discontinue its support for BUSD.
This strategic shift by Binance not only reflects the challenges faced by cryptocurrency exchanges under evolving regulatory frameworks but also prompts close observation from the cryptocurrency community regarding its ramifications on Binance's operations and the broader market.
