The US regulatory crackdown on digital assets seems to have taken a toll on Binance as investors have withdrawn over $6 billion from its stablecoin BUSD in the past month. New York’s financial regulator stopped the issuance of BUSD last month, citing issues related to Binance’s relationship with Paxos, the company that mints the token. As a result, BUSD in circulation has declined by more than a third. This outflow could have a negative impact on Binance’s financial performance.
The US authorities have increased scrutiny of the crypto industry following last year’s market crash and various scandals. Stablecoins play a vital role in crypto trading, allowing investors to switch between various digital tokens without withdrawing their cash as fiat currency.
Binance has said that it expects BUSD trading volume to shift to other stablecoin pairs.
The pullback of more than $6bn from the Binance-branded BUSD token in just a month is likely to affect Binance’s bottom line, as it is a significant part of its business. The fall in BUSD in circulation could act as a drag on the financial performance of Binance. As the US regulatory crackdown on digital assets intensifies, the pressure on Binance continues to grow, especially since New York’s financial regulator halted the issuance of the stablecoin BUSD due to the unresolved issues related to Binance’s relationship with Paxos, the company responsible for minting the dollar-pegged token.
As a result of New York’s crackdown on BUSD, Binance expects that BUSD trading volume will move to other stablecoin pairs over time. Even though BUSD was never considered “big business” for the exchange, it represented roughly a fifth of Binance’s trading volume in the last year, climbing to as much as 40% in December 2021, according to data from CryptoCompare.
However, Binance CEO Changpeng Zhao stated that the exchange intends to support as many other stablecoins as possible. Last year, Binance waived charges for trading BUSD against some digital tokens to increase its market share. Binance said that the vast majority of its revenues came from trading fees, but a reduction in overall volumes may put some strain on the exchange’s revenue.
Coinbase, the US-listed exchange, also said it would delist BUSD because the dollar-pegged token no longer meets their listing standards. Binance’s BUSD troubles come at a time when the world’s largest crypto exchange is facing scrutiny from American regulators as part of a wider pushback against digital assets in the US. Earlier this month, Zhao said Binance intended to pull back on potential investments in the US, following the Securities and Exchange Commission’s launch of enforcement actions against key crypto companies. The SEC recently opposed Binance US’s proposed $1bn acquisition of the assets of bankrupt crypto lender Voyager Digital, warning that part of the rescue package may violate securities law.
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