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Binance BUSD Stablecoin Trading Suspended by Coinbase Due to Liquidity Issues – What’s Happening?


Binance BUSD Stablecoin Trading Suspended by Coinbase Due to Liquidity Issues – What’s Happening?

Source: Adobe Stock/gguy

Coinbase has carried out the planned suspension of Binance USD (BUSD) trading, disabling trading of the stablecoin starting Monday.

“We have disabled trading for Binance USD (BUSD),” the US-based cryptocurrency exchange said in a March 13 tweet, adding that users will continue to have access to their BUSD funds and will be able to remove them at any time.

The exchange initially revealed its intention to suspend trading in BUSD late last month, citing “quoting standards” as the reason for the decision. The suspension affects, Coinbase Pro, Coinbase Exchange, and Coinbase Prime.

The move came after the New York Department of Financial Services (DFS) ordered Paxos, a crypto company that issues the Binance USD (BUSD) stablecoin, to stop minting BUSD tokens. In a consumer alert, the DFS said it issued the order “following several unresolved issues related to Paxos’ oversight of its relationship with Binance.”

Subsequently, it was revealed that the SEC had issued a Wells notice to Paxos and planned to sue the company over its BUSD issuance. The agency argued that BUSD is considered an unregistered security.

Following the regulatory crackdown, Paxos announced that it would “terminate its relationship with Binance” and stop issuing new BUSD tokens from February 21. However, the company will continue to support and redeem the tokens until at least February 2024.

The BUSD market cap has trended lower over the past couple of weeks as no new tokens have been issued. According to data from CoinMarkeCap, the market capitalization of BUSD, which stood at around $16.5 billion earlier this year, has fallen to around $8.4 billion.

Meanwhile, in terms of price stability, BUSD has been able to maintain its peg to the dollar despite the recent pressure.

USDC loses its peg amid US banking crisis

Over the weekend, USDC, a regulated stablecoin issued by Circle, moved away from its dollar peg after it was revealed that more than $3 billion of its reserves were held in an account with deposed lender Silicon. Valley Bank.

The stablecoin slipped to an all-time low of around $0.8774 on Saturday amid growing uncertainty. However, it began to recover after Circle pledged to cover any shortfall in the stablecoin’s reserves if it did not receive the full $3.3 billion held at SVB.

In addition, US regulators have approved plans to support depositors and financial institutions linked to parent company SVB. In several measures approved by authorities over the weekend, depositors at SVB and Signature Bank, which was closed on Sunday due to similar systemic contagion fears, will have full access to their deposits.

Right now, USDC is trading at $0.999, almost around its predicted anchor of $1. Notably, the stablecoin has seen massive redemptions over the past few days, losing over $3 billion in market capitalization amid the saga around US banks.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.