BUSD

Overview

BUSD was a regulated, fiat-backed stablecoin that maintained a 1:1 peg with the US dollar, issued by Paxos in partnership with Binance. However, as of February 2023, Paxos was ordered by the New York Department of Financial Services (NYDFS) to stop minting new BUSD tokens. In response to this regulatory action, Binance has announced the gradual phase-out of BUSD.

Purpose and Utility

BUSD was designed to serve as a stable medium of exchange and store of value in the cryptocurrency ecosystem, particularly within the Binance exchange and its associated platforms. Each BUSD token was backed by actual US dollars held in FDIC-insured bank accounts and US Treasury bills.

Business Model and Operation

The stablecoin operated through a regulated framework where Paxos maintained full reserves backing each token. Users could redeem BUSD directly for US dollars through Paxos, ensuring transparency and stability in the token's value.

Current Status

Following the NYDFS directive, Paxos will continue to manage the redemption of existing BUSD tokens until at least February 2024, and Binance is actively supporting users in transitioning to alternative stablecoins. The circulating supply has been steadily decreasing as users redeem their tokens.

Platform Usage

Despite the ongoing phase-out, BUSD continues to facilitate trading and transactions within the cryptocurrency ecosystem, particularly on Binance's platform, though with diminishing volume as users transition to alternatives.