Binance Announces Conversion of Binance-Peg BUSD to FDUSD at a 1:1 Ratio
On the 5th of this month, Binance announced the conversion of its Binance-Peg BUSD collateral assets to FDUSD at a 1:1 ratio. At that time, the market value of BUSD had just dropped below 1 billion US dollars, and within a short span of two weeks, its market value further decreased to less than 100 million US dollars. Additionally, Binance announced today that it will burn a significant amount of Binance-pegged Tokens across various chains…
(Previous Summary: Binance Terminates BUSD in Advance! Expiry Date Set for 12/15, FDUSD Becomes the 6th Largest Stablecoin in the Market)
(Background Supplement: Goodbye BUSD! Binance-Peg Collateral Assets Convert to FDUSD)
Article Contents:
The Decline of BUSD
Binance to Burn Binance-Pegged Tokens on Multiple Chains
What Is the Reason Behind?
On the 5th of this month, Binance announced the conversion of its Binance-Peg BUSD collateral assets to FDUSD at a 1:1 ratio as a step towards liquidating BUSD. At that time, the market value of BUSD had just dropped below 1 billion US dollars, and within a short span of approximately two weeks, its market value further decreased to less than 100 million US dollars.
According to CoinGecko’s data, the current market value of BUSD is approximately 99.64 million US dollars, which is more than a 99.5% decrease compared to its peak market value of nearly 23.5 billion US dollars reached in November 2022. It has dropped from being the 3rd largest stablecoin in terms of market value to currently ranking 19th.
Comparing the chart above, the sharp decline in BUSD’s market value started in November 2022. At that time, it was not only affected by the bearish market caused by the bankruptcy of FTX in the cryptocurrency market but also by the impact of a report filed by Circle, the issuer of stablecoins, to the New York Department of Financial Services (NYDFS). Circle pointed out that Binance failed to provide sufficient reserves for the BUSD issued through Paxos.
In January, Binance admitted that there was a $1 billion gap in the reserves of its version of BUSD known as Binance-Peg BUSD, but stated that it was only an “operational delay” and the issue was quickly resolved.
Subsequently, in February of last year, the market value of BUSD plummeted again due to regulatory crackdown. At that time, Paxos was sued by the SEC for allegedly “issuing unregistered securities” and was ordered by the NYDFS to cease the issuance of new BUSD.
Shortly after, both Paxos and Binance announced the termination of their partnership regarding BUSD. Paxos stated that the existing BUSD would continue to receive its full support and redemption at least until February of that year.
On December 15th of last year, Binance officially stopped supporting BUSD products and automatically converted BUSD in some user accounts to FDUSD at a 1:1 ratio on December 31st. Finally, on the 5th of this month, Binance announced the conversion of Binance-Peg BUSD collateral assets to FDUSD. These series of events have collectively led to a significant decrease in the market value of BUSD.
In addition, Binance announced an important initiative today:
Currently, Binance has issued 66 different B-Tokens.
This move has received positive feedback from the community. One netizen commented:
As mentioned above, Binance was criticized by Circle for failing to provide sufficient reserves to support the issuance of Binance-Peg BUSD. Now, by burning a large number of their issued tokens, Binance may be striving to improve compliance and transparency. This token burning action helps to demonstrate the company’s compliance with relevant regulations and its commitment to maintaining transparency. At the same time, it also helps to alleviate concerns about Binance potentially using customer assets as collateral for B-Tokens.
However, the specific reasons behind Binance’s token burning in this instance may be quite diverse, and it requires continuous attention to official statements and explanations.
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