Global crypto exchange Binance announced on Oct. 3 that it will end support for Binance USD (BUSD) borrowing and staking positions by Oct. 25, 2023. This closure appears to be part of a wider plan to phase out the troubled stablecoin, as regulatory scrutiny intensifies.
Binance has urged its users to convert their BUSD holdings to First Digital USD (FDUSD) as part of the gradual phasing out of support for the stablecoin. The exchange reassured its users that BUSD would remain backed 1:1 by USD until its support ends in February 2024.
Regulatory pressure has been a significant factor in Binance’s decision to phase out BUSD. Earlier this year, Paxos, the issuer of BUSD, announced it would halt the issuance of the stablecoin following scrutiny from U.S. regulators. The Securities and Exchange Commission also filed suit against Binance this summer for several alleged violations of U.S. securities law.
Since then BUSD’s circulating supply has dropped precipitously, from a peak of more than $20 billion to approximately $3 billion.
The exchange also removed BUSD from its Secure Asset Fund for Users (SAFU), claiming th removal was a strategic move to safeguard users, given the decreasing market cap of BUSD.
Under pressure
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and CEO Changpeng Zhao for several alleged violations of federal securities laws.
The SEC’s filing accuses Binance of profiting in billions by courting U.S. investors to buy, sell, and trade on its unregistered platform. The lawsuit also implicates BAM Trading Services Inc and BAM Management, who Binance partnered with in 2019 to launch Binance U.S.
In response to the SEC’s assertions that BNB and BUSD are securities. Binance has argued that BNB is a native token designed to create an internal economy and does not represent an investment contract, therefore holding that it is not a security.
