Binance USD stablecoin takes a $1 billion hit, as it falls to 4th position among stablecoins. Data from CoinMarketCap reveals that Binance’s branded stablecoin, BUSD, has experienced a significant decline in market capitalization. With its market cap currently standing at approximately $4.3 billion, BUSD has dropped from its previous position of $5.5 billion just a month ago.
BUSD Slips to Fourth Place Among Stablecoins, Trailing DAI’s Rising Market Cap of Over $4.6 Billion
Binance USD falls to 4th position among stablecoins, trailing closely behind the decentralized stablecoin DAI, which has witnessed a surge in its market capitalization, surpassing $4.6 billion in recent days. Tether’s USDT and USD Coin (USDC) retain their positions as the two largest stablecoins in the market, with market caps of approximately $83 billion and $28 billion, respectively.
The downward trajectory of BUSD’s market capitalization coincides with the recent directive from the New York Department of Financial Services (DFS) instructing Paxos, the crypto company responsible for issuing the stablecoin, to cease minting BUSD tokens. The DFS, in a consumer alert, clarified that the order was prompted by “several unresolved issues regarding Paxos’ supervision of its association with Binance.
As a result, it has come to light that the U.S. Securities and Exchange Commission (SEC) has sent a Wells Notice to Paxos, signalling its intent to take legal action against the company regarding the issuance of BUSD. The SEC contends that BUSD qualifies as an unregistered security. In response to the regulatory pressure, Paxos made the decision to sever ties with Binance and discontinue the issuance of new BUSD tokens starting from February 21. However, the company will uphold its commitment to supporting and redeeming existing BUSD tokens until at least February 2024.
SEC Files Lawsuits Against Binance and CEO for Illegal Securities Exchange Operations
Adding to the woes of the Binance-branded stablecoin, the U.S. Securities and Exchange Commission (SEC) has escalated the situation by filing lawsuits against both Binance and its CEO, Changpeng Zhao. The SEC alleges that the company has been engaged in unlawful operations as a securities exchange.
The regulatory agency has accused Binance of violating the law by providing unregistered securities to the public, which encompasses not only its native Binance Coin (BNB) token but also the BUSD stablecoin. This legal action further intensifies the challenges faced by Binance and raises significant concerns regarding the compliance and regulatory status of its offerings.
Intensified Sell-off Causes Temporary Loss of Tether’s Peg
During the previous week, the USDT stablecoin experienced a loss of its dollar peg due to significant imbalances in two major pools dedicated to stablecoin trading. Specifically, the USDT balances within Curve’s widely used 3pool, a stablecoin exchange pool consisting of USDT, USDC, and DAI, surged to over 70%. This indicated that traders had converted tens of millions of USDT into USDC and DAI.
The selling pressure on USDT emerged just days after the market capitalization of the largest stablecoin hit a new all-time high, surpassing $83.2 billion. Tether also reclaimed $20 Billion lost during the TerraUSD collapse. However, not all stablecoins have experienced such a recovery. USDC, the second-largest stablecoin, currently holds a market capitalization of approximately $29 billion, significantly lower than its peak of over $56 billion, as reported by data from CoinGecko.
In conclusion, the recent market dynamics have witnessed Binance BUSD facing a significant decline in market capitalization, where Binance USD falls to 4th position among stablecoins. Regulatory concerns, competition, and market volatility have contributed to this shift, while other stablecoins navigate their own challenges and recovery paths.
Also Read: Dollar Dominance to persist despite China’s Economic Rise says JP Morgan.
