Binance to Suspend BUSD Lending, Shifts Focus to FDUSD

Binance to Suspend BUSD Lending, Shifts Focus to FDUSD

Time Stamp: October 5, 2023 8:17 AM
Source Node: 2918309

More than
nine months after regulatory turmoil in the United States undermined the future
of Binance’s stablecoin, the exchange has decided to withdraw from its lending
completely. According to an official statement released this week, Binance USD
(BUSD) loans will be suspended as of 25 October 2023. This is another step
towards the complete termination of token support, which is planned for
February of next year.

The latest
statement announced that the Binance Loans service will close all existing BUSD
loans and collateral positions by 25 October. The platform is urging users to
repay any impacted loans before 07:59 (UTC) on the final date to avoid
potential losses.

Binance
Loans will continue to support other stablecoins, including FDUSD, which it is
currently promoting as an alternative to BUSD. Until now, users could borrow
their own BUSD tokens at a projected annual interest rate of 3%.

Finance
Magnates reported
in late August that Binance was preparing to withdraw support for BUSD.

This
was the first time the exchange encouraged its users to transfer the stablecoin
to other tokens, including FDUSD launched by the Hong Kong-based First Digital
Group in June.

Despite
promoting FDUSD over BUSD, the stablecoin that has existed for several months
is still far less popular than Binance’s own token. The current market
capitalization of BUSD is $2.24 billion, while FDUSD’s is only $406 million.

BUSD vs. FDUSD. Source: Coinmarketcap.com

However,
looking at transaction volumes, the latter is more active. Transactions worth
$1.3 billion are carried out using FDUSD within a day, whereas daily
transactions for BUSD are worth about $500 million.

The
exchange ultimately aims to halt support for BUSD by February 2024 completely.
However, Binance stated that BUSD will always maintain a 1:1 peg with the
stablecoin.

It All Started with Paxos
Issues

Binance
will withdraw support for its stablecoin a year after cryptocurrency firm Paxos
faced a Securities and Exchange Commission (SEC) lawsuit over violations of
user protection regulations. Additionally, a separate lawsuit against the
company was filed by the New York Department of Financial Services (NYDFS).

As a
result, the company decided to halt the minting of new BUSD tokens. The chart below
shows how this has dramatically affected the decline in the stablecoin’s market
capitalization.

BUSD falling market cap. Source: Tradingview.com

In the
meantime, Binance encountered several other regulatory hurdles, including
issues with handling traditional currencies. As Finance Magnates
reported in late September, Binance is suspending EUR operations offered
through Paysafe. Earlier in May, support for GBP payments was also suspended.

More than
nine months after regulatory turmoil in the United States undermined the future
of Binance’s stablecoin, the exchange has decided to withdraw from its lending
completely. According to an official statement released this week, Binance USD
(BUSD) loans will be suspended as of 25 October 2023. This is another step
towards the complete termination of token support, which is planned for
February of next year.

The latest
statement announced that the Binance Loans service will close all existing BUSD
loans and collateral positions by 25 October. The platform is urging users to
repay any impacted loans before 07:59 (UTC) on the final date to avoid
potential losses.

Binance
Loans will continue to support other stablecoins, including FDUSD, which it is
currently promoting as an alternative to BUSD. Until now, users could borrow
their own BUSD tokens at a projected annual interest rate of 3%.

Finance
Magnates reported
in late August that Binance was preparing to withdraw support for BUSD.

This
was the first time the exchange encouraged its users to transfer the stablecoin
to other tokens, including FDUSD launched by the Hong Kong-based First Digital
Group in June.

Despite
promoting FDUSD over BUSD, the stablecoin that has existed for several months
is still far less popular than Binance’s own token. The current market
capitalization of BUSD is $2.24 billion, while FDUSD’s is only $406 million.

BUSD vs. FDUSD. Source: Coinmarketcap.com

However,
looking at transaction volumes, the latter is more active. Transactions worth
$1.3 billion are carried out using FDUSD within a day, whereas daily
transactions for BUSD are worth about $500 million.

The
exchange ultimately aims to halt support for BUSD by February 2024 completely.
However, Binance stated that BUSD will always maintain a 1:1 peg with the
stablecoin.

It All Started with Paxos
Issues

Binance
will withdraw support for its stablecoin a year after cryptocurrency firm Paxos
faced a Securities and Exchange Commission (SEC) lawsuit over violations of
user protection regulations. Additionally, a separate lawsuit against the
company was filed by the New York Department of Financial Services (NYDFS).

As a
result, the company decided to halt the minting of new BUSD tokens. The chart below
shows how this has dramatically affected the decline in the stablecoin’s market
capitalization.

BUSD falling market cap. Source: Tradingview.com

In the
meantime, Binance encountered several other regulatory hurdles, including
issues with handling traditional currencies. As Finance Magnates
reported in late September, Binance is suspending EUR operations offered
through Paysafe. Earlier in May, support for GBP payments was also suspended.

Time Stamp:

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