Binance announced on the 5th of this month that it would convert its Binance-Peg BUSD mortgage assets to FDUSD at a 1:1 ratio, which is a measure taken to liquidate BUSD. At that time, BUSD’s market value had just fallen below $1 billion, and in just the next two weeks, its market value dropped further to less than $100 million.
According to data from CoinGecko, BUSD’s current market capitalization is approximately US$99.64 million, which has shrunk by more than 99.5% compared to its market capitalization high of nearly US$23.5 billion in November 2022. In addition, BUSD used to be the third largest stablecoin by market capitalization, but currently ranks only 19th.
The Decline and Fall of BUSD
Compared with the chart above, the market value of BUSD experienced a sharp decline in November 2022. This decline was not only affected by the bankruptcy of FTX and the entire cryptocurrency market entering a bear market, but also by stablecoin issuer Circle reporting to the New York Department of Financial Services (NYDFS). Circle pointed out that Binance failed to provide sufficient reserve funds for BUSD issued through Paxos. These factors combined led to the decline in BUSD’s market value.
Binance admitted in January that there was a $1 billion gap in the BUSD version of the reserve, but said this was an "operational delay" and the problem was quickly resolved.
In February last year, the market value of BUSD fell sharply again due to regulatory restrictions. At that time, Paxos was sued by the SEC for allegedly "issuing unregistered securities" and was ordered by NYDFS to stop issuing new BUSD.
Soon after, Paxos and Binance terminated their BUSD cooperation. Paxos stated that they will continue to support existing BUSD until at least February of this year.
On December 15 last year, Binance announced that it would stop supporting BUSD products, and on December 31, it would exchange BUSD in some user accounts for FDUSD at a 1:1 ratio. In addition, on the 5th of this month, it was announced that Binance-Peg BUSD mortgage assets will be converted into FDUSD. The continuous occurrence of these events resulted in a significant decline in the market value of BUSD.
Binance will destroy Binance-pegged tokens on multiple chains today
In addition, Binance announced an important initiative today: it plans to destroy a large number of Binance-pegged Tokens on various chains ( The token linked to Binance, referred to as B-Token) is destroyed and the equivalent amount of Token used as collateral on the native network is released.
Currently, Binance has issued a total of 66 different B-Tokens.
The reason behind it?
This action caused a positive response in the community. One netizen commented: “This initiative demonstrates Binance’s commitment to improving token economics, increasing ecosystem value, and increasing transparency. It is really exciting to see them taking action to optimize the network and release collateral on the native chain. Be excited. I look forward to them continuing their great work!"
As mentioned above, Binance has been criticized by Circle for failing to provide sufficient reserves to support its issued Binance-Peg BUSD. Now, by burning a large number of its issued tokens, Binance may be working towards greater compliance and transparency. This token burning helps demonstrate a company’s compliance with relevant regulations and demonstrates its commitment to transparency. At the same time, this also helps eliminate concerns that Binance may use customer assets as B-Token collateral.
However, the specific reasons behind Binance’s token destruction may be quite diverse, and we need to continue to pay attention to further official statements and explanations.
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