Binance Initiates Burning of Tokens, Including BUSD Stablecoin
In a recent announcement, Binance, one of the leading cryptocurrency exchanges, has declared its plans to burn several Binance-pegged tokens. This move comes as a part of the exchange’s efforts to terminate support for its BUSD stablecoin. The decision to end support for BUSD was made in response to regulatory challenges that have hindered its production.
Token Burning Process
On September 14, Binance took to its official X (formerly Twitter) account to reveal that it would commence the burning process for a number of Binance-pegged tokens. Among these tokens, four of them were BUSD tokens on different blockchains. According to the announcement, the tokens will be burned on the respective blockchains and an equivalent amount of tokens will be released by the exchange as collateral on their native networks.
Later today, #Binance will burn a number of idle Binance-pegged tokens.
The equivalent amount of tokens on their native networks, which were used as collateral, will then be released.
— Binance (@binance) September 14, 2023
The tokens that will be burned include BUSD on the Polygon (MATIC) network, BUSD on the Tron (TRX) network, BUSD on BSC, and BUSD on BNB. Additionally, Binance also announced that TUSDOLD on BSC would be burned, making it the only non-BUSD token on the list.
The collateral for the burning process will be an equivalent amount of Binance-pegged tokens. For example, if 1,000 BUSD on the MATIC network is burned, an equal amount will be released on the native blockchain by Binance.
The Regulatory Challenges faced by BUSD Stablecoin
The BUSD stablecoin encountered significant regulatory hurdles earlier this year. In 2023, the United States Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos, the issuer of BUSD, accusing the stablecoin of being an unregistered security. This move by the SEC hinted at potential legal action.
Following the SEC’s notice, the New York State Department of Financial Services requested Paxos to cease the production of new BUSD tokens due to concerns about the issuer’s association with Binance. As a result, Paxos decided to sever ties with the crypto exchange.
Since regulators intervened, BUSD’s usage and market capitalization have suffered. The stablecoin, previously a top 10 cryptocurrency by market cap, has seen its market cap dwindle to $2.5 billion, ranking it as the 26th largest cryptocurrency as of now.
Binance has also outlined its plan to completely discontinue support for BUSD by 2024. Paxos has stated that it will stop all BUSD redemptions in February 2024, with Binance expected to follow suit shortly after.
Despite regulatory challenges, BUSD has managed to maintain its 1:1 parity with the US dollar and has remained stable throughout this tumultuous period.
Market cap suffers amid regulatory crackdown | Source: Market Cap BUSD on Tradingview.com
Featured image from Zipmex, chart from Tradingview.com
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