Binance USD Capitalization Drop in Early 2023
Binance, a cryptocurrency exchange, has suffered losses as its token, Binance USD (BUSD), has decreased in market capitalization to $9.66 billion as of March 3, 2023, compared to $23.49 billion in November 2021. BUSD is a stablecoin, a cryptocurrency issued by Paxos, and its value is pegged to the US dollar at a 1:1 ratio. This means that each BUSD is backed by fiat currency, and its reserves are held in Paxos' accounts.
Binance USD is listed on the NYDFS (New York State Department of Financial Services) list, allowing for the use of this cryptocurrency for storing digital assets and trading. However, on February 12, 2023, the same department ordered Paxos to stop issuing new BUSD tokens as they are not registered securities, to protect consumer rights related to risks in crypto investing. This contributed to the decline in the stablecoin's market capitalization.
In addition, the cryptocurrency exchange Coinbase announced that it will remove BUSD from its list on March 13, as the stablecoin no longer meets its standards.
Currently, BUSD ranks 10th in market capitalization among all cryptocurrencies. To compensate for the decrease in demand for BUSD, Binance recently launched TrueUSD (TUSD) worth nearly $50 million, as the cryptocurrency exchange seeks to diversify its stablecoin reserves. Binance CEO Changpeng "CZ" Zhao said on a Twitter Spaces event on February 14 that after the initial launch of the BUSD project, he considered the possibility of its failure.