Binance to convert USD Coin into its own Stablecoin

Binance is discontinuing several stablecoin trading pairs and will convert user holdings in USDC and other stablecoins — with the exception of Tether’s USDT — into its own Binance USD (BUSD) token.

Binance said on Monday that current USDC, pax dollar (USDP), and trueUSD (TUSD) balances and new deposits would be changed to BUSD on September 29.

This practically implies that competing stablecoins, as well as their order books, will be merged into the platform’s own stablecoin. The change will not affect withdrawals, and Binance clients will continue to be able to withdraw amounts denominated in the three stablecoins.

Users who want to manually convert their holdings into BUSD at a 1:1 ratio before the auto-conversion can do so between September 26 and September 29 via Binance Convert.

According to Binance, the change is “a commercial choice to improve liquidity and capital efficiency for users.”

“BUSD is 100% backed by cash and cash equivalents and is a stablecoin regulated by the New York State Department of Financial Services (NYDFS),” a representative for Blockworks explained.

Third-party Paxos manages BUSD, which handles dollar redemptions, asset treasuries, and attestations.

Binance also stated that USDT is not one of the stablecoins participating in the auto-conversion program, but did not explain why. When asked how much USDC is now stored in Binance’s wallets, the spokesman declined to say.

Competition exchange FTX also combines USDC, TUSD, USDP, and BUSD stablecoin deposits as “USD” in its customers’ exchange wallets while accounting for USDT balances separately. There is no branded stablecoin for FTX.

According to Blockworks Research’s webpage, USDC, which is issued by Circle, is the second most valuable stablecoin after tether, with a market valuation of over $52 billion. Binance’s stablecoin has a market worth of $19.4 billion, whereas Tether has a market size of $67.5 billion.

Circle co-founder and CEO Jeremy Allaire appeared to support Binance’s action, anticipating that the move will result in a steady net share shift away from Tether and toward BUSD and USDC. “Converged dollar books on Binance are a wonderful thing,” he wrote.

A Circle representative, on the other hand, was more objective about the move. “Based on market behavior, it would appear that much of this transformation has already occurred, and although maximizing dollar liquidity on the world’s largest exchange may have advantages, the paradigm does pose possible market conduct concerns,” they informed Blockworks.

The decision to eliminate the majority of competitor stablecoins as trading pairs was received with considerable criticism as well. One Twitter user called Binance’s action “crypto monopoly 101.”

However, Binance’s strategy allows users to withdraw USDC, USDP, or TUSD at a 1:1 ratio from their BUSD accounts after the conversion, so no one is obligated to engage with Binance in BUSD.

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