Binance has been affected once again in this bear market. Paxos, the company behind the issuing of the Binance USD stablecoin (BUSD) announced that it will not mint new BUSD tokens. Customers will be able to exchange their BUSD for other coins if they desire.
Paxos Stops Mintinf Binance USD (BUSD)
Another hit for Binance came this time from Paxos, the company behind the BUSD stablecoin. The decision comes after an order from New York State regulators.
According to Changpeng Zhao, Paxos was requested by the New York Department of Financial Services (NYDFS) to stop minting new BUSD. Now, Paxos will continue with redemptions and focus on helping users move from BUSD to cash or other digital assets.
4/ Paxos will continue to service the product, and manage redemptions.
Paxos also assured us the funds are #SAFU, and fully covered by reserves in their banks, with their reserves audited many times by various audit firms already.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
This is a big hit for Binance. Binance is the largest cryptocurrency exchange in the world. Over the last few years, Binance prioritized Binance USD (BUSD) over other stablecoins such as Tether (USDT) and USDC.
There will have to be a large change in the exchange, which will have to adapt to this new situation. For example, some trading pairs will have to change from having BUSD as the base currency to another stablecoin. This can take time, as BUSD was the preferred stablecoin for Binance.
Another thing that is worth taking into consideration is that BUSD lost for a short period of time its peg with other stablecoins. Its price should be very close to $1 at all times, but due to the current situation, BUSD lost part of its value compared to other stablecoins.
Starting today, BUSD’s market capitalization is going to start decreasing day after day. There will be no new BUSD created and users will redeem their coins over time. This should give place to new virtual currencies to escalate positions in the market cap ranking.
BUSD was also very popular for users that liked to get access to Decentralized Finance (DeFi) applications on top of the Binance Smart Chain (BSC). Now, with this issue that affected Binance USD, users will have to find new ways to get access to these DeFi solutions. The DeFi market became very popular in 2021 when Bitcoin (BTC) and other virtual currencies were moving higher and there was a bull market.
Other popular stablecoins that could take Binance USD’s market cap include Tether and USDC. These two stablecoins are the largest in terms of market capitalization. USDC has a market cap of $40 billion while USDT is the leader with an almost $70 billion valuation, according to data shared by CoinGecko.
It is just a matter of time to see which is going to be the stablecoin that will absorb most of Binance USD’s market capitalization and users. Right now, Binance USD has a market cap of almost $16 billion. There are smaller stablecoins that could also be benefited from this situation. Therefore, it will be essential to see what will happen with these digital assets and how Binance will have to accommodate not to have its own stablecoin.