US regulatory curbs spark US$900 million slump in stablecoin BUSD
A US crackdown on a Binance-branded stablecoin has sparked US$900 million in redemptions of the token in a little over two days, the latest shake-up in a tumultuous period for the cryptocurrency sector.
The circulation of BUSD, the third-largest stablecoin, slid to US$15.2 billion as of 7.50 am on Wednesday (Feb 15) in London from more than US$16.1 billion on Monday, CoinGecko data shows. Investors are opting for No 1-ranked Tether or USDT, which now accounts for just over half of the US$138 billion stablecoin market.
Stablecoins are intended to hold a set value, for example, US$1. They come in a variety of forms, and some are underpinned by reserves like cash and bonds. Investors often park funds in stablecoins as they move between crypto trades.
Binance is the largest crypto exchange and BUSD – also known as Binance USD – was minted by a partner, Paxos Trust. A New York regulator told Paxos to halt new issuance over unresolved issues tied to Paxos’s oversight of its relationship with Binance. The Securities & Exchange Commission separately is considering taking action alleging that BUSD is an unregistered security.
That backdrop has led to uncertainty about the US stance on stablecoins, including USD Coin or USDC, whose issuer Circle Internet Financial is regulated as a licensed money transmitter under US state law. The circulation of USDC, the second-biggest stablecoin, is down US$370 million since Monday.
“The lack of clarity on the regulatory treatment of stablecoins in the US could have significant impacts on the industry,” Cristiano Ventricelli, a Moody’s assistant vice president, said in a statement. “Capital may migrate to stablecoins issued in jurisdictions with more tailored regulatory frameworks.”
Tether is located outside the US and receiving inflows despite scrutiny over the transparency of its reserves. New York-based Paxos has said existing BUSD coins remain fully supported and can be redeemed through at least February 2024. BLOOMBERG
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