America’s cryptocurrency crackdown has reportedly led investors to pull $6 billion from a Binance-branded stablecoin.
Last month, the New York Department of Financial Services (NYDFS) suspended new issuance of BUSD, due to what it said were unresolved issues connected to Binance’s relationship with Paxos, which minted the token for the world’s largest crypto exchange.
Investors have since rushed to withdraw their funds, leading the BUSD in circulation to drop by more than a third, the Financial Times (FT) reported Wednesday (March 1), citing data from blockchain analytics platform Nansen.
Analysts interviewed by the FT said the withdrawals could drag down Binance’s overall financial performance.
“This will probably hurt Binance’s bottom line as BUSD is a significant part of the business,” Ilan Solot, co-head of digital assets at Marex Solutions, told the news outlet.
Reached for comment by PYMNTS Wednesday, a Binance spokesperson downplayed the FT’s report, sharing this company statement:
“As we’ve noted previously, BUSD market cap will only decrease over time. We expect that this trading volume will move to other stablecoin pairs.”
Binance CEO Changpeng Zhao said as much on Twitter last month, telling his followers BUSD “was never a big business for us” and that he initially thought the project might fail.
The news comes two days after crypto exchange Coinbase said it was dropping BUSD from its platform, saying that the coin would be delisted March 13 after failing to meet Coinbase’s internal listing standards.
BUSD, which launched in 2019, is the third largest stablecoin by market capitalization, behind Tether (USDT) and USD Coin (USDC), Coinbase’s in-house stablecoin.
“We regularly monitor the assets on our exchange to ensure they meet our listing standards,” Coinbase wrote, emphasizing that customers’ BUSD funds will remain accessible and the exchange’s users will have the ability to withdraw their funds at any time.
As PYMNTS has written, both the NYDFS and the U.S. Securities and Exchange Commission (SEC) have BUSD, and the crypto industry as a whole, in their regulatory sights.
The SEC last month issued Paxos Trust a Wells Notice informing the crypto company of its potential plans to bring enforcement actions against it for violations of federal investor protection laws connected to the company’s issuance of BUSD.
Paxos stopped minting BUSD stablecoins Feb. 21 due to the regulatory scrutiny, which in turn led PayPal to pause its stablecoin project, being carried out in partnership with Paxos though unrelated to Binance.
PYMNTS has closely tracked how the SEC’s latest slate of enforcement actions in the crypto sector seem to be targeting stablecoins in particular.
As noted here recently, Biannce’s reputation — including its own admitted gaps in compliance and reports that it might leave the U.S. — have led industry observers to wonder whether the actions against it have more to do with the company than stablecoin assets themselves.