Binance-branded BUSD stablecoin, once holding a market cap of $5.5 billion, has plummeted by another $1 billion, now sitting at around $4.3 billion and dropping to the fourth position among stablecoins. This positions BUSD right behind the decentralized stablecoin DAI, which has experienced a rising market cap of over $4.6 billion.
Tether’s USDT and USDC Coin (USDC) continue to dominate the stablecoin market, each maintaining a market cap of nearly $83 billion and $28 billion, respectively. However, BUSD’s sustained decline in market cap is attributed to regulatory actions taken against Paxos, the crypto firm responsible for issuing the stablecoin.
The New York Department of Financial Services (DFS) ordered Paxos to cease the minting of BUSD tokens due to several unresolved issues surrounding the company’s relationship with Binance. Moreover, it was later disclosed that the SEC had issued a Wells Notice to Paxos, intending to sue the company over its BUSD issuance on account of it being viewed as an unregistered security.
Following such stringent regulatory measures, Paxos decided to terminate its relationship with Binance, halting the issuance of new BUSD tokens starting February 21. Despite this, the company will keep supporting and redeeming tokens until at least February 2024.
Adding to the woes of the Binance-branded stablecoin, the SEC has initiated lawsuits against both Binance and its CEO Changpeng Zhao, alleging that the firm conducts an illegal securities exchange. According to the agency, Binance broke the law by extending unregistered securities, including Binance Coin (BNB) and BUSD stablecoin, to the general public.
In the midst of all this, USDT briefly lost its dollar peg as the two main pools for stablecoin trading became heavily imbalanced. This imbalance occurred when USDT balances on Curve’s popular 3pool, consisting of USDT, USDC, and DAI, surged to over 70%, suggesting an exchange of tens of millions of USDT for USDC and DAI.
While Tether has successfully regained the market value once lost after the collapse of rival stablecoin TerraUSD, other stablecoins have seen differing degrees of fortune. For instance, USDC, the second-largest stablecoin, currently boasts a market cap of approximately $29 billion, significantly less than its former all-time high record of over $56 billion.
Although the rise of some stablecoins is evident, the sharp decline of the Binance-branded BUSD serves as a testament to the potential complexities and repercussions that may arise when regulatory scrutiny increases in the crypto space.
Source: Cryptonews
