Direct from the desk of Dane Williams.
As you’ve probably noticed, the stablecoin market has recently been marred by significant turmoil as global regulatory authorities intensify their scrutiny.
What’s the big mack daddy buck being lined up in the centre of these regulatory crosshairs?
Well that would be Binance USD (BUSD) of course, the extremely popular stablecoin operated by Binance.
As a consequence, BUSD has experienced a decline in market capitalisation, slipping down to fourth position.
This puts BUSD behind USDT, USDC and even DAI.
Yikes.
On the blog today, I seek to answer what happened to BUSD.
Aiming to shed a bit more light on the escalated regulatory actions targeting both Binance and Paxos, the custodian responsible for minting and issuing BUSD tokens.
Let’s take a look.
Why is PAXOS not minting BUSD anymore?
The regulatory pressure on Binance has become more pronounced in recent months, with authorities from various jurisdictions expressing concerns about potential legal violations.
Led by the United States Securities and Exchange Commission (SEC), Gensler and his cronies have reportedly been preparing to file a lawsuit against Paxos, the custodian of BUSD.
Really it’s the SEC's involvement that’s significantly impacted the market perception of BUSD.
Creating an atmosphere of uncertainty and leading to a loss of market confidence in the one unflappable collateralised stablecoin.
Furthermore, Paxos, the trust company responsible for issuing and safeguarding BUSD reserves, made the decision to temporarily halt the minting of new BUSD tokens.
The uncertainty surrounding the outcome of the lawsuit has prompted Paxos to exercise caution and suspend all minting until regulatory clarity is achieved.
As a result, the supply of BUSD has been affected, contributing to its declining market cap.
It’s easy to ask what the fuck Paxos, but the fact of the matter is that the company had no other choice once the SEC came knocking on their door.
All we can now do is await the impending SEC lawsuit to see what happens when an outcome has been reached.
Will BUSD recover?
As I mentioned above, the combined impact of regulatory challenges faced by Binance and the suspension of BUSD minting by Paxos has resulted in a serious decline in BUSD's market cap.
Once occupying a prominent position among stablecoins, BUSD now finds itself ranked fourth.
Trailing behind the market leaders USDT, USDC and even the part algorithmic conglomerate, DAI.
The legal and regulatory uncertainties surrounding BUSD have understandably made investors and users apprehensive, leading to a shift in market sentiment.
But whether it will recover is a tough one to answer.
The future trajectory of BUSD depends on several key factors, including the resolution of these regulatory challenges faced by Binance and Paxos.
Should Binance effectively address the regulatory concerns and Paxos secure a favourable outcome in the SEC lawsuit, it could pave the way for restoring market confidence in BUSD.
But whether Binance as a company can ever fully rebuild the trust that the market has lost in them and reclaim their original market share, remains to be seen.
What is the best BUSD alternative?
The recent regulatory challenges faced by Binance USD (BUSD) highlight the risks associated with relying on collateralized stablecoins in today’s financial framework.
Exploring permissionless alternatives - like say the only truly permissionless algorithmic stablecoin that made my top 5 stablecoins post - becomes imperative.
Of course I’m referring to Hive Backed Dollars (HBD), the Hive blockchain’s algorithmic stablecoin that operates completely independently of centralised custodians and collateral reserves.
Remember, rather than being backed by USD in a bank account, the Hive network’s conversion mechanism has instead pegged 1 HBD at or over $1 USD by ensuring that it can always be exchanged.
The decentralised nature of the underlying blockchain ensures security and offers users a more resilient and robust stablecoin option.
Particularly in the face of the regulatory uncertainties and potential disruptions we see marring BUSD.
As the stablecoin landscape continues to evolve and regulatory pressures persist, I’d encourage you to carefully assess the trade-offs between collateralised and algorithmic stablecoins
Keeping in mind the potential advantages and risks associated with each.
Ultimately, this is what will lead to you being able to make an informed decision.
Best of probabilities to you.
Posted Using LeoFinance Alpha
As long as BUSD stays equal to 1$ that's fine. HBD is of course our preferred alternative.
While BUSD is at its peg right there, there's just no way I'd trust the coin with large sums of money.
There's just too much uncertainty and the US regulator has killed all trust in Binance.
This could be a problem.
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@forexbrokr, I sent you an on behalf of @atma.loveWere any of the regulatory concerns regarding BUSD actually genuine? I doubt that. I think the attack on it was all part of the war on crypto.
Yes, Binance are super dodgy haha.
Paxos is regulated in the state of New York. As far as I know, NY is a stringent regulator. There has been no reason to suspect wrongdoing on the part of Paxos. BUSD is actually a wrapped coin on Binance Smart Chain. If the wrapper works properly, there is no reason at all to think there is something wrong with BUSD.
But that's the thing, that regulator is now after PAXOS.
So they've stopped minting new BUSD.
Yep. This has implications concerning CubDefi. Not urgent ones but at some point it will become necessary to use another stablecoin if a stablecoin pair is kept around.
Add the SWAP.HBD:SWAP.BUSD LP on Hive-Engine too.
I doubt if busd can really make the top two
It's certainly going to take a lot for the market to rebuild trust from here.
Sad situation. Somehow I always had the most "trust" in BUSD, somehow I felt most comfortable with it. Later there were banking problems and the USDC suffered a bit so I was afraid of it too. And what was I left with? With Tether, which paradoxically has the most question marks :D
I need to think about HBD exposure then.
Great post, Dane.
Haha, I'm the same and it's absolutely crazy.
I just think that the role of regulator is meant to be to protect and ultimately HELP their citizens.
But all they end up doing is pushing people into offshore, questionable pathways.
Super frustrating.
Totally agree. I guess we just have to sit here and see what will change in few years.
I wonder when will the SEC sue Hive over HBD. If SEC sues Hive, who will it send the notice to?
Exactly.
The top witnesses who are based in the US.
Then it would be up to those with stake to unvote them and put in geographically distributed witnesses outside of the SEC's jurisdiction so the chain kept going.
Thanks for the detailed rundown on the current situation revolving BUSD. I don't keep any significant amount of it but it's always good to be informed.
$HBD for the win!
✊.
It sucks to see the regulations hit the stablecoins, but it was kind of expected. The financial system wants to make sure that the money is inside their economy and having it in crypto doesn't help them. At the same time, the regulations makes it hard for the centralized entities to continue on with specific crypto coins. Binance has been hit quite hard lately so I am not surprised to see BUSD suffer.
Personally, I do think its fair enough that collateralised stablecoins are regulated.
They are just US dollars sitting in US banks after all.
But regulating HBD is a whole other kettle of fish.
Unregulatable!
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Good to hear.
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Yes boss, thanks for being there for me. What's your discord username, can we link up boss?
No Discord please.
Kk boss.
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