At its peak, BUSD ranked third among stablecoins, with a market capitalisation of up to $23 billion. But Binance CEO Changpeng Zhao's (CZ) attempt to force out the competition has failed. In 2024, BUSD will leave the market for good.
In 2022, to strengthen his influence, CZ took the bold step of announcing the mandatory conversion of some incoming stablecoins on Binance to BUSD. This yielded good results, and in the following 90 days, its capitalisation skyrocketed by 11%.
Circle (the issuer of USDC) found this decision disruptive and filed a complaint with the New York Department of Financial Services (NYDFS). In February 2023, the regulator filed a pre-trial complaint against Paxos for issuing BUSD, causing the company to stop minting the coin further. Support for BUSD will be terminated in early 2024.
After the Paxos announcement, BUSD trading went down, and Binance started looking for a replacement.
The regulatory pressure came for a reason. A little earlier, American media published reports about the BUSD's insufficient collateral since a clone of it was printed on the BSC (Binance Smart Chain) network, and the gap between the reserve and supply exceeded $1 billion in certain months. In addition, analytical agencies found instances of clients' funds being mixed with the company's assets. Later, Binance admitted mistakes in its financial management.
BUSD's damaged reputation and the impending withdrawal of support from Paxos left the crypto exchange with no other option but to abandon stablecoin. On 31 August, Binance officially announced that it would stop supporting BUSD in February 2024 and informed customers that they needed to convert it to other coins.
This news hurt another cryptocurrency exchange coin, BNB. Due to the increased regulatory pressure on Binance, it's already performing poorly in 2023.
CZ tried to expand the use of its stablecoin but wasn't sufficiently accurate about how it was managed. By introducing zero fees in 2023, the use of coins other than BUSD was encouraged.
In March, Binance advertised a move to TUSD, but in June, this stablecoin lost its peg to the dollar, trading at a 20% discount. In a press release on 31 August, the crypto exchange offered to switch from BUSD to Hong Kong First Digital Group's FDUSD, a coin that emerged in June 2023.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)