Leading cryptocurrency exchange Binance has said it will cease support for its Binance USD (BUSD) stablecoin starting December 15, 2023.
The news comes three months after the exchange announced that it would “gradually” phase out the dollar-denominated cryptocurrency from the platform following its issuer Paxos being ordered by US regulators to halt minting new tokens.
BUSD was the most traded cryptocurrency on Binance until February of this year. Launched in 2019, the token endorsed by Binance was owned and minted by stablecoin issuers Paxos Trust Company.
BUSD Holders Have Until February 2024 To Redeem BUSD Balances
In a blog post on November 29, Binance said users should withdraw or convert their existing BUSD balances on the exchange into other assets before December 15. Although customers can redeem their BUSD until February 2024, the platform will disable withdrawals for the stablecoin starting December 31.
At that point, all existing balances in BUSD will automatically be converted into First Digital USD (FDUSD) at a 1:1 conversion rate with zero fees. Users can also trade their BUSD for FDUSD at zero trading fees.
Additionally, all collateral assets of Binance-peg BUSD will be converted to FDUSD at a 1:1 conversion rate. The company expects the procedure to take place sometime next month.
FDUSD is a newly launched USD-denominated stablecoin by FD121 Limited, a subsidiary of Hong Kong-based financial firm First Digital Limited.
Binance had ceased borrowing and lending services for its native stablecoin in October.
Related Readings: Police Issues Security Warning Over iPhone’s ‘NameDrop’ Feature
US Regulators Ordered Paxos To Stop Minting BUSD Earlier This Year
Trouble began for BUSD back in February when the US Securities and Exchange Commission (SEC) issued a Wells notice to Paxos, alleging that the stablecoin was an unregistered security.
At the time, Paxos argued that BUSD is a US dollar-collateralized stablecoin regulated by the New York Department of Financial Services (NYDFS). Binance added that Paxos owned and issued the cryptocurrency and was also the custodian for the dollar reserve backing it.
However, following the SEC’s enforcement action against Paxos, the NYDFS ordered the stablecoin issuer to stop minting new BUSD, citing concerns over its reserve assets.
Shortly after, Binance was sued by the Commodity Futures Trading Commission (CFTC) for violating federal financial laws and offering unregistered crypto derivative products to US investors. The case is still ongoing.
The latest development is part of Binance’s strategy to comply with global regulators. The company has been embroiled in legal battles with several US regulators, including the SEC, CFTC, Office of Foreign Assets Control (OFAC), the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), and the Department of Justice (DoJ).
Binance CEO ‘CZ’ Steps Down Following $4.3 Billion Settlement With US Government
On November 21, the DoJ announced they had reached an agreement with Binance and its former CEO Changpeng ‘CZ’ Zhao to end all criminal investigations against them with a penalty of $4.3 billion.
Zhao stepped down from his position as part of the settlement and pleaded guilty to violation of the Bank Secrecy Act, a charge linked to his company’s alleged role in facilitating crypto transactions for criminal organizations. Binance was accused of failing to maintain anti-money laundering compliances, operating an unlicensed money-transmitting business, and violating US sanctions laws.
CZ has since been replaced by Richard Teng, the former head of Binance’s regional markets. In a recent blog post, Teng wrote that he is committed to working with federal agencies to ensure that the crypto exchange complies with US laws and regulations.
Prior to August, BUSD was the third-largest stablecoin by market capitalization. The dollar-pegged cryptocurrency reached a peak valuation of $23.3 billion in November 2022.
At the time of writing, the BUSD market cap stands at $1.68 billion, having lost more than 90% of its value in a 12-month period