Binance to phase out BUSD as regulatory scrutiny grows

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Binance to phase out BUSD as regulatory scrutiny grows

Binance, the global cryptocurrency exchange, announced on Oct. 3 that it will end support for Binance's USD borrowing and staking positions by Oct. 25, 2023. As regulatory scrutiny grows more intensified, the closure appears to be part of abroader strategy to phase out the troubled stablecoin.

Binance has urged its users to convert their holdings of BUSD to First DigitalUSD as part of the gradual phasing out of support for the stablecoin. The exchange reassured its users that BUSD would remain backed 1:1 byUSD until its support ends in February 2024.

Binance's decision to phase out BUSD has been driven by a significant level of regulatory scrutiny, which has been a significant factor in the decision. Paxos, the issuer of BUSD, announced earlier this year that it would stop the issuance of the stablecoin following scrutiny from U.S. regulators. The SEC filed a civil lawsuit against Binance earlier this year, alleging violations of U.S. securities law.

Since then, BUSD's circulating supply has dropped precipitously, from a peak of more than $20 billion to about $3 billion.

The exchange also removed BUSD from its Secure Asset Fund for Users, saying that the removal was a strategic move to safeguard users given the decreasing market cap of BUSD.

The SEC has filed a lawsuit against Binance and CEO Changpeng Zhao alleging violations of federal securities laws. The SEC's filing accuses Binance of profiting billions by courting U.S. investors to buy, sell, and trade on its unregistered platform. The suit alleges that Binance is collaborating with BAM Trading Services Inc and BAM Management, who Binance teamed up with in 2019 to launch Binance US. In response to the SEC's assertions that BNB and BUSD are securities, the SEC said in a statement. Binance contends that BNB is a native token that is designed to create an internal economy and does not represent an investment contract, thereby maintaining that it is not a security.