- Binance will stop offering borrowing and lending services for its native stablecoin, Binance USD (BUSD), by October 25.
- All outstanding BUSD loan and collateral positions will be closed by the end of October, but users can continue to borrow and lend using other stablecoins.
- The termination of BUSD services follows a phased approach, with BUSD’s market capitalization dropping from $23 billion in November 2022 to $2.23 billion at the time of the announcement.
Binance, a leading global cryptocurrency exchange, announced on October 3 that it will cease support for Binance USD (BUSD) borrowing and staking positions on October 25, 2023. This shutdown seems part of a larger plan to phase out the unstable stablecoin as regulatory scrutiny rises.
Binance has asked its customers to switch their BUSD holdings to First Digital USD (FDUSD) as the stablecoin’s support is gradually phasing out. The exchange informed its users that BUSD would be backed 1:1 by USD until February 2024, when support would stop.
Binance’s decision to phase out BUSD was influenced by regulatory pressure. Following an investigation from US officials, Paxos, the stablecoin’s issuer, said earlier this year that it would suspend BUSD issuance. This summer, the Securities and Exchange Commission also filed a lawsuit against Binance for alleged violations of US securities legislation.
Since then, the circulating supply of BUSD has plummeted from more than $20 billion to around $3 billion.
The exchange also deleted BUSD from its Secure Asset Fund for Users (SAFU), arguing that the removal was a deliberate measure to protect users due to BUSD’s declining market size.
The Securities and Exchange Commission (SEC) of the United States has launched a complaint against Binance and its CEO, Changpeng Zhao, for alleged violations of federal securities laws.
In its filing, the SEC accused Binance of making billions of dollars by luring US investors to buy, sell, and trade on its unregistered platform. The lawsuit also names BAM Trading Services Inc. and BAM Management, with whom Binance collaborated in 2019 to build Binance U.S.
In response to the Securities and Exchange Commission’s accusations that BNB and BUSD are securities, Binance claims that BNB is a native token created to develop an internal economy and does not represent an investment contract, so it is not a security.