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(Kitco News) – The stablecoin landscape continues to undergo changes as Binance, the largest cryptocurrency exchange in the world, is now encouraging its users to start converting their Binance USD (BUSD) holdings into other assets, including the newly issued stablecoin First Digital USD (FDUSD).
According to a statement released by Binance on Thursday, the exchange plans to “gradually cease support for BUSD products” in response to stablecoin provider Paxos’ decision to halt minting new BUSD.
In February, the New York State Department of Financial Services (DFS) announced they were investigating Paxos Trust Company and matters related to the issuance of BUSD.
Several days after the investigation was announced, Paxos issued a statement saying they would stop issuing BUSD in response to an order from the DFS and the issuance of a ‘Wells notice’ from the Securities and Exchange Commission (SEC), which informed the firm that they consider BUSD to be an unregistered security.
Thursday’s statement from Binance is the first time the exchange has officially addressed the plan to halt support for BUSD and comes after several users shared screenshots of a pop-up they received on their mobile apps announcing the move.
“Binance will continue to support multiple stablecoins and digital assets on its platform,” the announcement said. “Users are encouraged to convert their BUSD assets into other available assets on Binance prior to February 2024. Users may trade their BUSD balances for FDUSD at zero trading fees, or convert their BUSD balances to FDUSD at 1:1” using Binance Convert.
The February 2024 deadline for conversions aligns with statements made by Paxos that BUSD “will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024.”
Binance will also be gradually delisting BUSD spot and margin trading pairs and will cease allowing withdrawals of Binance-Peg BUSD tokens via BNB Chain, Avalanche, Polygon, Tron, and Optimism networks on September 7.
BUSD was once the third-ranked stablecoin by market capitalization behind Tether (USDT) and USD Coin (USDC) but has fallen out of favor with traders in the wake of the crackdown by the DFS and SEC and recommendations by Binance that users begin to migrate away from the token.
FDUSD is a stablecoin that was launched in June by the Hong Kong-based trust company First Digital Group, a qualified custodian and registered trust company. The stablecoin is backed on a 1:1 basis by one U.S. dollar or assets of equivalent fair value, held in accounts of regulated financial institutions in Asia. FDUSD had its debut listing on Binance in late July.
Coinbase prepares to list PYUSD
Coinbase, the largest crypto exchange in the U.S., announced on Wednesday that it will add support for PayPal USD (PYUSD) on the Ethereum network, and said trading will “begin on or after 9 am PT” on Thursday, “if liquidity conditions are met.”
“Once sufficient supply of this asset is established trading on our PYUSD-USD trading pairs will launch in phases,” Coinbase said. “Support for PYUSD may be restricted in some supported jurisdictions.”
The exchange is adding support for PYUSD under the “experimental asset” label, which means the asset is either new to the Coinbase platform or has a relatively low trading volume compared to their “broader crypto marketplace.”
“We encourage you to exercise caution with these assets as they come with certain risks, including price swings and canceled orders associated with lower volume and availability,” Conbase said.
PYUSD was launched by digital payments provider PayPal on August 7 as part of the firm’s plan to expand its blockchain integration and help “transform payments in web3 and digitally native environments,” the company said. The stablecoin is issued by Paxos and is “fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents.”
Several exchanges have already listed the stablecoin, including Huobi, Kraken and Crypto.com, but its adoption has thus far been muted. Data provided by blockchain analytics firm Nansen shows that as of Friday, roughly 90% of PYUSD is currently held in wallets controlled by Paxos, and holdings on crypto exchanges account for around 7% of the total supply.
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