The world’s largest cryptocurrency exchange Binance has announced it will cease supporting its native stablecoin BUSD.
Operations to support the stablecoin will stop on 15 December following its issuer being ordered to stop minting BUSD after reports surfaced earlier in the year that it was not 1:1 backed.
All BUSD withdrawals will stop on 31 December and Binance has confirmed that any remaining amounts of the stablecoin will be converted to FDUSD – a stablecoin issued by FD121. Binance users will be able to redeem BUSD until February 2024.
The New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD after it was alerted it does not hold enough of several cryptocurrencies in reserves to support its tokens issued to investors.
Circle, issuer of the USDC stablecoin, is thought to have alerted the NYDFS initially after they believed Binance ‘mismanaged’ reserves of its BUSD stablecoin, with the Securities and Exchange Commission (SEC) ordering Paxos – BUSD’s issuer – to cease the minting of the token.
The complaint to the NYDFS also claimed that USDC tokens held by Binance were undercollateralised, with one source close to the matter stating that just $100m worth of USDC was used as collateral to the alleged $1.7bn worth of USDC which was held.
The news of the BUSD’s cancellation caps off a year of regulatory difficulty in the US for Binance, who recently settled a record $4.3bn figure for breaking money laundering and money transmitting laws.
The company’s Founder and ex-CEO Changpeng Zhao also resigned from his position after he admitted to individual charges and was released from prison on a $175m bond.
Zhao’s defence team is working on sending him back to his residency in the United Arab Emirates before his February 2024 sentencing date, but the US Department of Justice is pushing back to keep him on US soil.
