Cryptocurrency exchange Binance has taken action in response to Paxos’ recent decision to stop minting new BUSD, switching out its holdings of BUSD in the Secure Asset Fund for Users (SAFU) with TrueUSD (TUSD) and Tether on March 17. This move follows a decrease in BUSD’s market capitalization.
Binance created the Secure Asset Fund for Users (SAFU) in July 2018 to protect users’ funds against security breaches and other unexpected events. As of January 29, 2022, SAFU had a total value of $1 billion, and its wallets contained BNB and TUSD/USDT (replacing Binance USD). Binance reassured users that this change would not affect them and that their funds were kept in publicly verifiable addresses, with BUSD still supported. The exchange also stated that it would monitor the fund closely to ensure sufficient capitalization and would top up the fund periodically using its own funds.
On February 13, Paxos Trust Company announced that it would be ceasing the issuance of BUSD in accordance with the directions of and coordination with the New York Department of Financial Services. However, after reports emerged that U.S. regulators were taking action against PAXOS and BUSD, Binance minted almost $50 million worth of TUSD on February 16, according to Etherscan data. This occurred only two days after Binance CEO Changpeng Zhao had discussed diversifying their stablecoin holdings away from BUSD in a February 14 Twitter Space.
The U.S. Securities and Exchange Commission’s involvement with BUSD has caused members of the crypto community to question if stablecoins are the real focus here or if it has more to do with Binance – considering the SEC did not take any action against Paxos’ PAX Gold (PAXG).